The latest Dear CEO letter to discretionary investment managers and stockbrokers identifies a range of concerns the FCA has in significant areas. The FCA requires firms to ensure these concerns are addressed. If you’re an adviser using a discretionary investment manager for client assets, now might be a good time to pause for thought.
Recently there have been examples of such firms falling into administration and, in two cases this year, it seems that there has been a shortfall in client assets, leading to delays and losses.
Clearly, no adviser wants to be in the position of having recommended a firm which later runs into difficulty, and the purpose of due diligence is to identify and check out potential problem areas up front, before any monies are committed.
In the words of TR16/1, advisers should:
‘establish whether they believe it appropriate to entrust the provider with client assets.’
Note: The new foreseeable harm rules under Consumer Duty throw this into sharp focus: if the FCA has identified potential issues, it’s difficult to argue that they’re not ‘foreseeable’. And if they’re foreseeable, advisers must take steps to establish that appropriate protections are in place.
In recent years, the FCA has issued numerous Dear CEO letters across industry sectors, so there are a lot of foreseeable harms to consider.
DD|hub
The DD|hub question library is kept up to date as new issues emerge, ensuring advisers get the due diligence data they need to make sensible, informed decisions. Importantly, there are also scoring tools to help users keep track, and a comprehensive report to evidence their reviews.
DD|hub now has due diligence data for:
- 53 discretionary managers, covering 92 bespoke, MPS or IHT Business Relief services
- 22 adviser platforms
- 34 multi-asset fund managers, covering 65 fund ranges SIPPs and non-AIM IHT products are also being added in the coming weeks
DD|hub is an excellent first point of call when looking to review and validate providers – whether that be firms you already use, or new firms which you are considering recommending to clients.
