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Due diligence that supports your client relationship

Andy McGeown, Platform expert, explains why it’s so important to assess the ‘soft’ benefits for your clients and highlights some of the recent changes we’ve made to improve our service offering.

Please forgive me for adding to the growing archive of due diligence opinion, but isolating the factors that make a platform tick – and that are relevant to your business – can be a challenge.

The FCA refers to research and due diligence as a ‘process carried out by a firm ‘to assess (a) the nature of the investment, (b) its risks and benefits and (c) the provider (to establish whether they believe it appropriate to entrust the provider with client assets).

One point highlighted by the FCA in their thematic review (TR16/1) was that firms were failing to manage the conflict between the client’s interests and their own. ‘This was evident, for example, in the consideration of service level as an overriding factor when selecting platforms. In some cases firms placed the level of service they received as a key factor ahead of the level of service received by their client.’

Clearly, good service to both parties is important but establishing the level of service your client will receive is not easy.  With this in mind, I recently took the time to read through some requests for information (RFI) from advisers that had been sent into Old Mutual Wealth. There was a common theme across all: a focus on functionality, governance and stability, and there was evidence that they were being considered in terms of client benefit.

However, there was not one question relating to softer services that the client may receive from the platform provider. No question asking what initiatives were being run to help keep clients at the forefront of our employees’ minds. No question exploring the service support the client would receive if they contacted Old Mutual Wealth directly, or how we would deal with vulnerable customers which, given the ageing demographic of our society, is no small thing.

I believe this is down to two things:

1. That the primary relationship with the investor is usually viewed as being between the adviser and client.

Clearly this is true, and rightly so. However, for all clients invested through the platform there will always be an element of service provision by the provider. This may become more or less prominent throughout the lifetime of your client’s investment.

2. Service benefits are hard to quantify in terms of the tangible benefit to the client.

Evidently, hard facts are simple to understand and therefore easier to satisfy. I see a lot of due diligence requests framed in that manner; cold yet calculated. The tendency is to focus on what impacts the client’s investment directly. For example, is there a CGT tool available on platform that promotes good tax planning? Can the client phase into their investment? But this tendency excludes the softer side of service that contributes to the overall experience of the investor, and ultimately helps inform the decision on whether you believe it appropriate to entrust the provider with client assets (point c above).

Ultimately, you need evidence and assurance that the provider will deliver a level of service that validates your recommendation; that inspires confidence and helps to support a strong relationship with your clients. Due diligence should be seen as a good opportunity to assess both the hard and soft benefits to your customers. Over the long term, good service can help to promote behaviours that ultimately result in a better outcome for the client, which is something that we are all pushing for.

A prime example was our recent announcement that, from 3 July, we will be able to pay a funeral director or home up to £10,000 (or the claim value if less), in advance on all valid life insurance claims without waiting for probate.

We are passionate in our aims to deliver an outstanding service to you and your customers. To learn more about the steps we are taking to ensure good service, please take a look at our short video.

For financial advisers only. Not to be relied on by consumers.

This article is for information purposes only. The views expressed in this document are those of our sister company, Quilter Investors and not of Old Mutual Isle of Man or Old Mutual International Ireland, and are subject to change without notice.

You should be aware that investments, unit prices and income from units may fall as well as rise and you may not get back the amount you invested. Past performance is not a guide to future performance. Where a fund invests in securities designated in a different currency to the currency of the Old Mutual International product or where an underlying fund is denominated in a different currency, investments may rise and fall purely as a result of exchange rate fluctuations. Old Mutual International nor our sister company Quilter Investors do not provide investment advice. This document is provided for information purposes only and should not be relied or acted on by the recipient. It is not a recommendation to buy, sell or hold a particular investment. The views expressed in this document are those of Quilter Investors and not of Old Mutual International Isle of Man or Old Mutual International Ireland, and are subject to change without notice.

For information about your Old Mutual International policy and your investment choices, please contact your financial adviser.


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