Increasing regulatory scrutiny has seen the Financial Conduct Authority emphasise the need for advisers to ensure appropriate due diligence and research is carried out to support the recommendations given to clients.
Focusing on Prudential’s PruFund range of funds; the guides from Defaqto cover Isas, bonds and pensions, while the report produced by AKG looks specifically at structure, investment management and governance capabilities.
Onus not just on advisers
Paul Fidell, investment specialist, at Prudential said: “We believe the onus on providing appropriate evidence to support the due diligence and research process shouldn’t rest solely with advisers.
“With the increased popularity of outsourced investment solutions among advisers and growing regulatory pressure to demonstrate the suitability of funds and products recommended to clients, product providers and platforms must play a supporting role by providing advisers with readily available access to appropriate information.
“As part of our ongoing commitment to supporting advisers, Prudential has commissioned two expert independent research companies to provide analysis on our product, funds and investment management capability.”
“Financial advisers, in addition to testing suitability for customers, will need to carry out deeper research and due diligence."
Good customer outcomes
Matt Ward, communications director at AKG Financial Analytics, said: “There is a proliferation of managed fund/portfolio solutions in the market at present. With a weight of money already invested here, and more heading in this direction, there will be a responsibility on these solutions to support the delivery of good customer outcomes.
“Financial advisers, in addition to testing suitability for customers, will need to carry out deeper research and due diligence in this area. There will be a range of comparison points but we feel that over time the quality and rigour of the risk management processes and governance frameworks underpinning managed funds/portfolios will become a key differentiator.
“The work that AKG has done in this assessment not only shines a light on the PruFund structure and processes in this regard but it should also provide advisers with a template to use when appraising risk management processes and governance frameworks in other solutions of this type.”
Due diligence Q&A
David Cartwright, head of insight and consulting at Defaqto, said: “We are fully aware of the due diligence requirements faced by advisers and the need for transparency from providers.
“As part of our engagement with Prudential, we have prepared question and answer guides to support adviser due diligence. Each guide takes the 10 most common due diligence questions and independently provides answers to each one. It also includes the Defaqto Risk Ratings to help advisers select the most suitable PruFund for their clients.”