Confusion reigns over new suitability standards

By Justin Cash

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Aug 31, 2018

The majority of advisers are unaware that new rules have been introduced forcing them to evidence the suitability of investments by client segment, new research shows.

Product governance rules, governed by the FCA’s Prod handbook, were introduced alongside Mifid II in January, are require advisers to make sure they understand the investments they are recommending and make them appropriate for the particular target client.

However, nearly 60 per cent of advisers are aware of Prod at this stage, and only 5 per cent know what their obligations are under the rules, according to polling by technology provider Iress.

70 per cent are unsure if they can evidence the suitability of products and services by client segment, and 80 per cent are not familiar with what enforcement actions the FCA might take over rule breaches.

ress executive general manager for wealth Mark Loosmore says: “The new rules in Prod have caught many people in the industry unaware. There seems to be widespread confusion and concern around the steps advisers should be taking to ensure client suitability processes are evidenced appropriately.

“There is no doubt that advisers need to take notice of Prod. It’s no longer guidance, it’s rules based now.”

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