The FCA’s Consumer Duty represents a significant shift in the regulator’s expectations of firms across the distribution chain, including asset managers, platform providers and financial advisers.1
In accordance with the Duty, firms must act to deliver good outcomes and prevent foreseeable harm to vulnerable retail customers, using a data-driven approach to evidence that reasonable efforts have been implemented to meet desired outcomes across four pillars:
- Products and Services
- Price and Value
- Consumer Understanding
- Consumer Support
The Duty has an implementation deadline of July 2023 for active products. However, as recently as late January, the FCA identified issues with firms’ current preparedness to meet the deadline2 and at Aiviq we are seeing our asset managers increase focus on implementation plans.
What does this mean for Asset Managers?
Importantly, the Duty affects firms across the distribution chain, including asset managers, who need to meet requirements despite sitting the furthest away from retail investors. This is challenging because asset managers operate in a world of imperfect information, often having to contend with limited client transparency data from platforms and legacy technology systems on both sides.
For instance, some UK platforms still do not have the technology to support the ring-fencing of restricted funds from retail investors or tracking of orphaned retail investor accounts that are no longer advised by IFAs.
Despite this, Aiviq is seeing asset managers come together, taking proactive measures to close information gaps and demonstrate they are using data to discharge their duty to retail investors. Through industry panels, focus groups and sample-based testing of market communications, factsheets and other collateral, attempts are being made to identify vulnerable customers and address gaps in understanding.
The question remains, however, whether this is sufficient for managers to evidence they are making ‘reasonable efforts in line with the new Duty.
Do asset managers need to demonstrate some level of ongoing monitoring of retail investor behaviour and their use of products and services?
How can Aiviq help?
Aiviq processes AUM & Flow data for over 25 of the largest UK platforms, breaking down the Transfer Agent (sub-ledger) data to shine a light on each asset manager’s distribution value chain.
Our cloud-based data solution can help asset managers achieve each of the outcomes of the Consumer Duty cross-cutting rules and integrate within wider sales reporting for the UK Wholesale market.
Aiviq works with our growing user community and wider industry stakeholders across the value chain to help asset managers meet a wide range of client AUM, Flow & Revenue data use cases throughout their organisations.
Citations
1 – FCA PS22/9: A New Consumer Duty
2 – FCA Consumer Duty Implementation Plans.
