Time to challenge your MPS providers on Consumer Duty

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For financial professionals only

Advisers are, quite rightly, asking their platforms and product providers how they’ll be supported following the introduction of Consumer Duty. But are they challenging their MPS providers and DFMs in the same way?

Both are key elements in many adviser firm’s CIPs, so need to evidence how they're preparing to support advisers directly, and how they’re working with platforms to make sure that everything needed for the April and July deadlines, and beyond, is in place.  

A shift in mindset?

Despite the best efforts of PROD in 2018, some managers operating at arm’s length from the end customer have only ever shown a passing interest in who their products are sold to. Even now, with Consumer Duty looming, the prevailing narrative for managers is often “the adviser is our customer” or “knowing the client is your job”.

This might be technically correct, but Consumer Duty was designed to put consumer understanding and support at the heart of business activity. This means managers must be able to explain who their target client is and evidence how they’re able to provide good outcomes, while avoiding causing foreseeable harm to the customer. Managers saying they can’t look past the next in line will no longer cut the regulatory mustard.

From April, any firm manufacturing a product or service that’s provided to retail clients must fulfil the Consumer Duty principles PRIN 2A.3 around products and services, and PRIN 2A.4 around price and value (alongside their other consumer duty obligations). That includes investment services like generic MPS solutions, even if they're operated on an agent as client basis.

This fundamental shift needs joined up thinking and cooperation from all parties to make it work smoothly so we can collectively make sure retail customers receive good outcomes.

Clear, understandable product information from every angle

The key will be defining how new product information on MPS solutions and other relevant details are made available and, where appropriate, shared throughout the distribution chain. 

To do this, we should look at the impact Consumer Duty will have on DFMs, platforms and advisers, and how it will be applied to their services. Each will have their own specific focus:

For DFMs, the key consideration will be how to apply the new regulation to their MPS service and target market, and to consider the detail from the manufacturers of the assets held. They need to provide advisers and their clients with more information about the services they offer, and the outcomes they can expect to receive.

For Platform providers, the focus is aligning their target market for custody services and wrappers with that of the DFMs and individual fund managers on their platform.

And Advisers offering financial planning services will need to consider all the information provided by DFMs and platform providers in light of their target market.

Beyond that, all three need to measure, review and report on their respective services, so the client can be confident the price they’re paying for these services is accurate and fair, and therefore are receiving value for their money.  

Making it happen

Fortunately, advisers are nothing if not adaptable.

They already know the capabilities and limitations of theirs and their DFMs platforms and will no doubt be mapping out an approach, building secure touchpoints to make sure the necessary information can be shared appropriately, without adding cost, risk and additional workload to their business processes.

This is where Parmenion can really help. Our platform was built to simplify the relationships between DFM, platform and client. We work with our partners to understand their biggest challenges and pain points, so we can offer solutions that make their lives easier.

We share these solutions, like our business reporting tool Vantage, with other DFMs who manage their services in our custody. We’re already developing Vantage to help advisers monitor patterns in sales so they can see trends in performance. And the progress won’t stop there.

You can find more about how we support advisers with their investment propositions and reporting here.

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.  

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