14 May 2018
2018 promises to be an interesting year, with the FCA showing signs of becoming ever more interested in the value that Financial Services firms offer to their clients.
The FCA’s Asset Management Market Study Policy paper, published in April, lays out the requirement for Fund Managers to increase transparency over costs, and appoint independent directors to their board. It is the responsibility of the Fund Managers Independent Chair to ensure that the firm complies with its value assessment duties and acts in the best interests of fund investors.
The FCAs Investment Platform review report, (due by the end of June 18) has some commentators speculating that best practice could be for the adviser to pay the costs of the platform he recommends, thus placing greater emphasis on the effect of charges on investors monies, than may be currently applied by many adviser firms when selecting preferred platforms. Raising the question, will costs now be deemed to outweigh the old stalwarts of legacy, financial stability and service?
Already one or two more visionary industry commentators have speculated the next focus for FCA scrutiny may well be the costs of receiving financial advice and the value added by seeking advice. Cost have for most firms increased over the last 5 years and will no doubt continue to do so As Regulatory costs, Professional Indemnity cover and the general costs associated with running a business have all increased, there is a limit to how far costs can be reduced before the effectiveness of any business suffers.
So, rather the focus should be on the value provided to each client every year. Under RDR many firms segregated client banks, offered differentiated charges with corresponding service propositions. For many clients this works very well, however at the fringes this is not always the case and it for those clients, you may wish to review the value you are adding to that client. Could a similar service be offered by alternative means, would the client benefit by paying slightly more for a better service level?
However, when/if the FCA approaches this issue, time spent now in reviewing and considering your approach, could prove to be time well spent.