Advisers’ compliance with the Consumer Duty could be in jeopardy if investment third parties fail to share robust reports, warns HRIS

by | Oct 27, 2022

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Advisers’ ability to fully comply with Consumer Duty is in jeopardy if their investment providers don’t provide them with regular transparent updates or operate with the rigour needed to meet the new requirements, warns Hymans Roberts on Investment Services (HRIS), as the first deadline of the new guidance nears.

In its briefing, Consumer Duty: getting what you need from your investment provider, HRIS highlights some of the most crucial parts of the FCA’s (Financial Conduct Authority) Consumer Duty for Advisers, including that Advisers must have confidence in their outsourced parties’ investment processes and operational resilience.

The paper also outlines what Advisers should expect to see from outsourced investment management solutions. Focusing on model portfolios, it explains that Advisers should look for stringent investment rigour from their investment providerIn addition, it also draws attention to the need for Advisers to be sure any evidence clearly shows processes are being followed and that the firm’s primary focus is on enhancing retail customers’ outcomes.

Commenting on the need for Advisers to be diligent when gathering evidence from third parties,  William Marshall, Chief Investment Officer – Hymans Robertson Investment Services (HRIS) says:

“The Consumer Duty is here, and its first deadline is already looming. The Duty’s scope is wide and is designed to have a deep positive impact on end consumer outcomes. When reading the FCA’s Finalised Guidance on the Consumer Duty, Advisers would be wise to take note of key words that run throughout the document, these are: must, should and may. They’re important because they tell Advisers the extent to which the FCA expects any relevant third parties to comply with the guidance. There are some significant “musts” to which particular attention should be given because, to achieve compliance with the Duty, firms will need to evidence they are meeting these requirementsAdvisers, for instance, must be aware of the needs of the target market, make sure the consumer understanding is strong and that value for money is being achieved.

“For some Advisers, the process of evidencing the requirements of the Consumer Duty may represent an evolution of their current processes; however, for others, there will be a substantial amount of information to pull together in a short period. So having reliable third-parties who are able to demonstrate their alignment to the Consumer Duty and can evidence their own strong governance and reporting structures will be key to many Advisers being successful in complying with the new guidance.” 

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