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Mike Hogg: Understanding due diligence

mike hogg

One part of the FCA’s focus at the moment is ensuring advisers are carrying out appropriate due diligence across the retail investment space, including income drawdown, platform selection and fund choice. So where do advisers begin, and how can they be sure their review processes meet the FCA’s exacting standards?

Whether approaching platform due diligence or choosing the right drawdown provider, the same key steps apply.  And it all goes back to making sure you have the right client segmentation and suitable propositions in place.

Similar to accumulation, best practice indicates that you should be able to evidence clear segmentation of your client bank for those at or in retirement, and then match your service proposition back to each client segment. For example, if you’re selecting a third party provider, you will be able to draw up an initial shortlist of the market, using key metrics that you have already identified.

You can then refine this initial shortlist by the functionality required to deliver the relevant client retirement proposition, rating the ‘must have’ and ‘nice to have’ features.

Finally, it’s extremely important to thoroughly document the entire thought process and rationale for selecting the tool or third party service.

What criteria should advisers use when assessing tools or third party services?

The scale and efficiency of your chosen third party will be important in helping your business to meet the increased demands involved in effectively managing retirement clients. Providers with a strong financial position can afford to continually reinvest in their processing capability and proposition development.

Mike Hogg is head of platform proposition at Standard Life

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