Organising clients along target markets has become increasingly popular in the run-up to consumer duty implementation, Dynamic Planner has said.
According to the company, by the end of June, 20 per cent of firms using Dynamic Planner had created target markets using the company's research tool to help organise their clients and get ready for the consumer duty.
This figure represented a tenfold increase compared to January, as firms pushed to meet the July 31 consumer duty implementation date.
Chris Jones, proposition director for Dynamic Planner, told FTAdviser: "We saw a significant rise in advisers aligning their clients into target markets on our system.
"Originally when we built out system it was in relation to Prod, and understanding distribution strategies and research in relation to the target markets and segmentation that was part and parcel the rules under Mifid II."
it is simply a way of helping to bring together the three basic needs of aligning outcomes to individual clients.Chris Jones, Dynamic PlannerAccording to Jones, the team at Dynamic Planner had built the research function to help advisers with whole-of-market recommendations, enable them to review decisions over time and use it to align certain choices to different distribution strategies for different clients.
Jones said: "Prod became a simple regulatory process which many advisers were subconsciously doing anyway - organising their research and recommendations against a defined target market or individual.
"But consumer duty has made it more important to create audit trails and do this more systematically. Therefore, as our users started to get to grips with consumer duty, we saw a significant acceleration in advisers using the new research function.
"Advisers have been increasingly aligning their client base on our system as it has made it easier to meet consumer duty requirements."
The team calls the service, which since June 6 is now embedded for all Dynamic Planner users, the 'Target Market Tool'.
"We call it that but it is simply a way of helping to bring together the three basic needs of aligning outcomes to individual clients", Jones said.
According to him, these are defining:
- Who the target market or individual is
- What the appropriate funds/products are
- How to organise and review client needs systematically and more time/cost effectively.
Jones said: "I am sure advisers have been doing it already, but this research tool can help them work out exactly where the value piece is and make necessary changes in line with consumer duty.
"Nobody has time to think about massive changes; this just enables the adviser to make adjustments that fit the advisers' own business models and client needs.
"We're not telling advisers how to structure their client base or when to do the reviews. It's just providing a structure that can help them meet the consumer duty requirements, and create new distribution strategies."
It also allows advisers to filter and create strategies for different clients, and configure the communications in a different format. For example, reports created by the tool will allow advisers to make the font bigger or simplify the language if the target market/individual has known vulnerabilities.
But Jones added the tool was not in place simply to allow advisers to pigeonhole clients.
He explained: "It is not about making the adviser create lots of target markets, but about supporting different ways of servicing different people."
Prod rules
Earlier this year, Dynamic Planner's chief executive Ben Goss told FTAdviser that Prod was the 'key' to understanding and complying with the consumer duty rules.
The Product Intervention and Product Governance source book (Prod) rules, which came into force in 2018 alongside other European Union-led Mifid II directives, means that companies now have to ensure that any investment products recommended to clients do the following:
- Fulfil the needs of one or more identified target markets
- Are distributed appropriately
- Deliver appropriate client outcomes.
At the time, he said: "While the regulator has posed the challenge of consumer duty, it has also provided the answer - Prod regulation and understanding how to target markets."
simoney.kyriakou@ft.com
