Our Head of Wealth Management and Retirement Product shares his thoughts on the adviser as manufacturer debate and what this really means for advisers.
Last week there were several exchanges across social media about whether, following implementation of Consumer Duty, adviser businesses will be deemed as manufacturers under the new regulations.
At Parmenion we believe the answer is yes.
Under Consumer Duty, a manufacturer is a firm that creates a product or service. The definition of a product or service is something that’s provided to retail clients – for example, providing a regulated activity such as financial advice.
Consumer Duty considers an advice proposition to be a service and, as the advice firm is designing and providing that service, it’s that company that’s the “manufacturer”.
So practically what does this mean for advice firms and what is the FCA likely to expect them to do?
Guidance suggests that adviser firms, like other financial firms, will need to prove that the services they provide meet the needs, characteristics and objectives of clients in a defined target market(s). For each service a firm offers, it should be able to demonstrate:
- The target market for the service
- The client outcomes the service is intended to deliver and the reason why / how the service is likely to achieve the outcomes
- That they have clear information for clients about the service
- How they chose suppliers for key elements of the service
- That the service is delivering fair value
- How the firm will monitor each element to ensure the service operates and delivers the intended outcomes
This may sound like a lot but there’s good news.
We all know that most firms are doing a lot of this already even if it’s delivered in different ways. This is the result of high-quality client management - advisers know how to look after their own clients - and the implementation of existing PROD rules. So, while it’s very important that advisers are aware of their status under Consumer Duty, in our view it doesn’t have to be an onerous task for adviser firms.
Having said that, perhaps the key point is that doing the right thing isn’t enough on its own. We all have to be able to evidence good practice explicitly within the framework set out by the FCA.
Parmenion has always supported advisers in delivering their own propositions, providing insightful tools that are designed with advice firms in mind. From our platform to our product wrappers and our range of discretionary investment services, we can help you evidence consideration of target markets and clear client communication.
Take Vantage, our business reporting & data service. It provides flow charts to give net trends and overall performance. Our newly launched Advisory Models PRO includes options for advisers to add notes and narratives to client update notifications. And our Income Management Tool (IMT) helps explain income planning scenarios in a visual and client friendly way.
Perhaps our maths teachers were right - getting to the right answer isn’t enough, you really do need to show your working. Parmenion is there to help advisers do just that.
Daniel Edwards, Head of Wealth Management and Retirement Product
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity.
Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.