I saw a transcript of a speech by Clive Adamson, Director of Supervision, the FCA, at the APCIMS Compliance Conference, London, and noted some key points that the FCA suggest firms focus on. For those reading I thought I would add some commentary (in bold) as to how a number of themes are inherent (or at least my reading of such) within Financial Simplicity’s technologies…

  • Firms should consider their oversight arrangements to ensure they are suitable for the nature, size and complexity of the firms in question.

(My Comment : We think that the need for oversight is spot on and the need for firms to be equipped with a new era of management information about their portfolio operations. This is not just about providing clients with some oversight and perspective at portfolio review time, but continual oversight in their businesses about the relative status of client portfolios to their prescribed or assigned investment mandates. At Financial Simplicity we have pioneered this new era of oversight so that regardless of the size of a firm, anyone and everyone in the firm is equipped with the portfolio management information to get the perspective and oversight of the service they are delivering)

  • Firms should record and keep up-to-date consumer information in order to ensure their individual portfolios continue to be suitable for them. We expect firms to make every effort to keep this information current and relevant.

(My Comment : We believe that this is a mandatory, and not only in terms of contact details, and records about risk profiles from a compliance point of view, but to absolutely inclide the very specific instructions and feelings from clients about the way they want their investment  portfolio managed for them). Our feedback from many consumers (and advisers) is that in the past much focus has been about theory of investment management with less focussed on the client’s specific feelings about investments in their portfolios). With a highly competitive environment upon us, we feel that systems that can accommodate individual client specific rules, preferences and constraints will be critical not only form a compliance perspective but also from a client relationship management and client retention perspective)

  • Firms should identify and manage conflicts of interest. We want to see that you have thoroughly considered any potential conflicts of interest and will look, for example, at how many in-house products or products manufactured by an associate of the firm are held within individual portfolios – questioning whether this is right for the customer.

(My Comment  Whilst I don’t see it a role of technology to drive the choice of investments used by a firm, clearly with focus on conflicted remuneration now upon us, the real issue here is that what is the most appropriate, efficient and to some extent cost effective way of delivering value for investment clients. With the massive growth of passive investment funds in the last few years, there is strong argument to indicate that the value add to clients has moved from the choice of products, to the active monitoring and management of portfolios, requiring the oversight and decision support technologies to achieve such)

  • Firms must deliver the services customers have signed up for, agreeing upfront the exact nature of the service they will provide and how the customer will pay for this – ensuring it is recorded in the client agreement signed at the start of the business relationship.

(My Comment : For some time the question of ‘delivery vs promise’ has been around in relation to investment services. With increased focus in this area from both a regulatory, but also consumer perspective, both the demonstration of value and it’s delivery and articulation of such will be increasingly important. From a technological perspective this is all about providing the capabilities for constant oversight and monitoring, pro-active rather than scheduled client interaction, and such interaction being focussed on each specific investor rather than an ‘across the board’ approach. We designed Financial Simplicity for this.

  • Firms should ensure that their customers’ wealth is legitimately acquired. It is important firms have a culture based on integrity and ethical values, combined with effective anti-money laundering controls and anti-bribery and corruption processes to prevent their businesses from being used for the purposes of financial crime.

(My Comment : Absolutely !)

  • Firms should ensure portfolios are consistent with customer objectives. It is important to explore and record your customer’s attitude to risk and fully understand how they want to invest their money. Where we find that your records are unclear, we will question why.

(My Comment : We think that there will be growing emphasis on technology to support this point, and the need for a new era of relationship managers who can adapt and interpret this from investing clients). The monitoring of portfolios to these objectives and goals will move to become a hygene factor over time)

  • And finally, firms should clearly set out their periodic reports. These provide vital information to customers with discretionary accounts and without them, they cannot judge how well their investments are being managed, whether they are performing in line with their expectations, or if they getting value for money. So we expect reports to be clear, use appropriate benchmarks and adequately disclose relevant fees.

(My Comment : In a new era of smart phone empowered consumerism, we are of the view that access to information about consumer assets has jumped to a new level where the baseline is moving to a level where the consumer seea everything about their investments on-line 24×7, on any device, and with the information comes perspective and context. Technologies such as Financial Simplicity have a huge role in this and our latest portfolio ‘presentation’ module we hope will define the new standard for consumer interactions by wealth firms)