The Professional Adviser 360 North event in Warrington (17 October) was excellent, with a packed agenda on topics of genuine interest to the many advisers in attendance.
Technology and platforms were hot topics but perhaps the most keenly followed presentation was that of Rory Percival, the former FCA executive turned consultant, who focused on PROD (product intervention and product governance sourcebook). His presentation was engaging and, with Halloween around the corner, scary enough to send chills down the spine of any adviser not fully conversant with the rules.
PROD – what’s that?
Judging by the response he got when he asked the question “have you heard of PROD?”, there would have been quite a few advisers wishing there was a sofa to hide behind. Only five hands went up!
PROD rules came in on the 3 January this year, along with MiFID II. As Mr Percival highlighted in his presentation, the rules require advisers to carry out specific actions to their business engagement process before they implement financial solutions for clients, such as investment management and, more importantly, it requires these actions to be clearly documented to provide evidence that the work has been done.
The reason the FCA is so keen on these new rules is, as Mr Percival spelled out, so they can have something tangible with which to fine firms. It’s not that they are on a witch hunt specifically but more that when they’ve investigated firms who they believe are not treating their customers as well as they might, they have found it difficult to pin something specific on them. Not to put too finer point on it, PROD appears to be their stick to beat advisers with!
As if that wasn’t enough to make advisers’ blood run cold, Mr Percival claims the FCA will next year say that the market isn’t competitive, so will increase regulation! He predicts that they will use PROD to force change – and ‘force’ means tough intervention, probably hefty fines (and not just on the big firms).
Get a CIP
His main advice – aside from getting familiar with the PROD rules – was to identify clients and map to a Central Investment Proposition (CIP).
Advisers who adopt a CIP, segment sensibly (not just by wealth), treat each customer fairly in terms of cost and make good records of their processes and justifications have little to fear. The rest may need a big sofa to hide behind!