INVESTMENT ADVISER | ISSUE 09 2024 7
SUPPORTING SUITABILITY
The Consumer Duty requires firms to revisit and refine their advice processes and be able to evidence the delivery of good outcomes for clients . This means financial advice firms must not only consider the suitability of their investment recommendations but also be able to justify the decisions behind them .
With risk-controlled services , this responsibility is supported by a robust research process , conducted through the Simplybiz Investment Committee ( IC ) which meets quarterly to review and document findings . This panel of seasoned industry experts includes research and ratings from Defaqto and Hymans Robinson within its process and documentation to give you a robust and reliable foundation to your advice .
REPEATABILITY
Our risk-controlled services help advisers meet their due diligence obligations by providing a clear , repeatable framework . The quarterly IC updates offer ongoing research , allowing firms to demonstrate that their advice is grounded in rigorous analysis . This process helps advisers ensure that investment risks are aligned with the client ’ s agreed risk appetite . While no investment is risk-free , a structured framework ensures that the risks are well understood and suitable for each individual client .
PRODUCT GOVERNANCE
Furthermore , risk-controlled services help firms meet the FCA ’ s expectations around product governance . For example , the FCA now requires firms to assess and document not only the suitability of products for their target market but also identify those for whom a product would be inappropriate — what the FCA refers to as a negative target market assessment . The distinct workflows for accumulation and decumulation within our risk controlled offering ensure that products are selected with a client ’ s life stage and financial objectives in mind , minimizing the risk of unsuitable recommendations .
SEGMENT SUITABILITY
A fundamental aspect of any advice process is conducting thorough research and due diligence on investment strategies . Under The Consumer Duty , the FCA expects firms to be able to prove that their products and services meet the needs of their target market , and that appropriate research has been conducted .
Our risk-controlled services simplify this by providing a wealth of research that firms can use to support their advice . The regular investment committee reviews offer independent , critical analysis of the investment options available , ensuring that each recommended product is well-documented and benchmarked against optimal standards . For financial advice firms , this provides crucial evidence that their advice is not only suitable at the outset but continues to be appropriate over time , with updates available to adjust as markets or client circumstances change .
It also provides governance over the entire advice process , from product selection to ongoing monitoring . This level of oversight not only supports compliance with FCA requirements but also helps firms streamline their operations , making it easier to deliver consistent , high-quality advice across different client segments .
RETIREMENT INCOME
The FCA ’ s recent thematic review ( TR24 / 1 ) on retirement income advice highlights the importance of tailoring strategies for clients in the decumulation phase . Too often , firms have failed to differentiate their advice for clients approaching retirement , leading to suboptimal outcomes .
Risk-controlled services directly address this challenge by offering specific solutions for both accumulation and decumulation clients . The risk-controlled framework ensures that investment selections are appropriate for the differing needs of these client groups , aligning with the FCA ’ s best practice guidelines from TR24 / 1 . For example , the risk controlled system ensures that accumulation products are not mistakenly recommended to clients who are in the decumulation phase of their financial journey .
The focus on consistency within the RC framework is particularly beneficial here . By employing tools like the retirement income calculator built into Defaqto Engage , advisers can ensure that their advice is not only appropriate for a client ’ s risk profile but also consistently applied across all similar cases . This minimises the risk of poor outcomes and strengthens the firm ’ s ability to meet the FCA ’ s expectations for providing good advice .
CONSISTENCY AND EFFICIENCY
Consistency in advice is a core theme throughout both The Consumer Duty and TR24 / 1 . Firms that lack a clear , repeatable process for providing investment advice are more likely to see variation in the quality of their recommendations . This inconsistency can expose firms to regulatory risk and lead to poor client outcomes .
Risk controlled services offer a solution by streamlining the advice process , ensuring that all advisers work within the same structured framework . The quarterly investment committee reviews and ongoing due diligence provide a foundation for consistent advice , helping firms avoid the pitfalls of fragmented decision-making . This not only de-risks the business but also makes the advice process more efficient , allowing firms to focus on delivering tailored , high-quality recommendations without the burden of repeated ad hoc research .
INDEPENDENT SCRUTINY
While the firm remains ultimately responsible for the advice it provides , risk-controlled services enhance business security by offering independent , expert analysis . The investment committee reviews all investment options available through the risk controlled service , evaluating each partner without bias and against a benchmarked standard . This independent scrutiny helps ensure that the advice provided is suitable , thoroughly researched , and free from conflicts of interest .
AUDIT TRAIL
Firms using risk-controlled services can also demonstrate a welldocumented advice process , which is critical for both regulatory compliance and client trust . In the event of a challenge or complaint , the documented evidence from its research and due diligence can serve as a valuable safeguard , helping protect the firm from claims of unsuitable advice .
By offering governance , independent analysis , and a structured , repeatable process , our unique risk-controlled services enable firms to deliver consistent , high-quality advice that meets the FCA ’ s heightened expectations , helping to make good outcomes more cost-effective .