INVESTMENTS
If you ’ ve read , or even glanced at , the FCA Handbook , you ’ ll know it ’ s big . There are sections on COBS , CASS , SUP , DEPP and the one that has become prevalent in the press , PROD . PROD stands for Product Oversight and Governance ; indeed PROD 1.1.2 states : “ Product oversight and governance refers to the systems and controls firms have in place to design , approve , market and manage products throughout the products ’ lifecycle to ensure they meet legal and regulatory requirements ”. The regulator has a lot to say in PROD and , to be honest , extracting what the regulator means and expects from a distributor ’ s perspective isn ’ t the easiest thing in the world to do . But also , to be fair , there ’ s some great stuff and practical guidance if you take the time to read it through . At SimplyBiz , we ’ ve recently finished running a series of events called Regulatory Focus , with more planned for the none too distant future . They are easily digestible short and sharp sessions designed to take a common regulatory theme , explain exactly what it means and then show how it can practically benefit financial advice firms . It ’ s all about uncomplicating the complicated . There are literally dozens of virtual pages set aside for PROD in the Handbook , and it can be condensed into a number of key elements :
• Take into account the nature and understand financial instruments from the whole of the market .
• Take into account the nature and understand your target market .
• Assess the financial instruments and use them in the best interests of the client .
Getting it committed to paper is great , but let ’ s take something complex , uncomplicate it and then use it to enhance your business . PROD is an excellent methodology to employ within a Centralised Investment Proposition ( CIP ). And that ’ s what we want to achieve in our Regulatory Focus sessions , to take a common regulatory theme , explain exactly what it means and then show how it can practically benefit financial advice firms . The practicality comes in when you build PROD into a CIP as it drives it , and it is also very flexible . Here ’ s the suggested methodology we employ when conducting consultancy work with SimplyBiz member firms . It ’ s a framework which can be edited in any way a firm sees fit , after all the Regulator does not prescribe what a CIP should look like , however , it is expected that you have a logical procedure in place .
Process How
Regulator guidance
Governance framework
Platform , product and investment philosophy
Understand and action the guidance from FCA Factsheets , Finalised Guidance , Thematic Reviews and any other relevant publications .
Identify those who will manage the Investment Proposition and define their roles .
Identify the important aspects in selecting products , platforms and investments .
PROD BASICALLY SAYS MAKE SENSE OF YOUR CLIENT BANK AND SEGMENT IT BASED ON CLIENT CIRCUMSTANCES , MAKE SENSE OF ALL THE INSTRUMENTS YOU HAVE AT YOUR DISPOSAL AND USE THEM IN THE BEST WAY TO ACHIEVE YOUR CLIENT ’ S AGREED GOALS . I CAN ONLY SEE THAT AS A LOGICAL , ROBUST APPROACH .
Product governance
Investment , platform and products selection process
Review procedure
Outline procedures to identify client segments and the relevant financial instruments .
Create a process to undertake research and due diligence , identify investment , platform and product solutions suitable for an individual client or a segment of clients .
Have review and version numbers on documents .
Diarise the review date . Maintain a change log .
How do you do that ? You write it down , make a statement on how you ’ re going to fulfil PROD obligations . How else would you demonstrate that to the Regulator ? In my experience , it has been said by advisers on many an occasion , over a coffee and a Danish , at some event in some hotel that :
• it ’ s a tick-box exercise
• it doesn ’ t actually do anything or help me
• it ’ s a time-waster
• we do it anyway , what ’ s the point ?
• [ insert your own words here ]
I would disagree with that . PROD basically says make sense of your client bank and segment it based on client circumstances , make sense of all the instruments you have at your disposal and use them in the best way to achieve your client ’ s agreed goals . I can only see that as a logical , robust approach .
Where it becomes a major benefit is when you create a selection process you can replicate within your research tool of choice , all your forethought , understanding and professionalism can be built into that , thus saving you time and making you efficient . PROD doesn ’ t have to be a tick-box exercise , it ’ s the driver of a great CIP and in future instalments we will explore other essential ingredients that make up The Ultimate CIP .
If you ’ d like to discuss any element of this article , or anything connected to business consultancy more widely , please don ’ t hesitate to contact Karl at k . dines @ simplybiz . co . uk .
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