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Proof of pudding is consistency

Is it time to change the script that says software is centre stage in the research process and that the curtain should be drawn on product panels?

Over the last two weeks, I have concentrated on the necessary depth of product and provider research behind the IFA proposition. I have also suggested an approach to research that satisfies regulatory interest in client-specific recommendations.

As big warehouses of product data, there is no doubt that systems such as AssureWeb&#39s Prodpak, Aequos and Synaptics are enormously beneficial to the sector. But in light of regulatory concerns about justification of product recommendations, it is important that IFA firms can demonstrate consistency of approach in the use of these systems as part of their documentation process.

An inconsistent research methodology – data source or basis of analysis of financial strength – can lead to discrepancies in results and will sound alarm bells with the regulator.

One way I believe product research software can work well is in conjunction with a product provider panel. Construction of either a panel or recommended buy list can demonstrate an agreed process and framework for research, leaving you with a choice of the best products and providers. At the point of sale, the software system can interrogate the panel and match solutions to the client&#39s specific needs.

The key to this process is to tailor the software to ensure consistent application of filter questions. Such an holistic approach lends itself to the application of consistent research methodology resulting in client-specific matching of requirements and, above all, consumer benefits, as non-performing product providers will not make the cut.

Some or all aspects of the research process can be outsourced. Here, the FSA expects careful third-party selection and heavy IFA input in research selection criteria. It is important that your research selection criteria and philosophy are fully documented and understood by your research agency to enable tailoring of the research product to meet your needs.

What should an IFA look for when considering outsourcing some or all aspects of the research process?

Make sure you meet the whole team and ensure they are well qualified so if one person leaves the continuity of your service is not affected.

Make sure written procedures are in place and there is an openness to them being audited regularly.

Can they help you to configure a technological solution? What experience have they got in this area?

Get testimonies from other IFAs who have used them or even the product providers who have to deal with them.

The FSA&#39s comparative league tables aim to provide the customer with information to help them choose products. Past performance figures will not be included as it is suggested that all the customer wants to know about is price. While the FSA should be applauded for addressing high charges, the tables could inadvertently end up promoting some of the consistently worst-performing funds. Performance must continue to play a part in an IFA&#39s selection process.

Alongside these tables, the Raising Standards initiative is developing a quality mark scheme including a voluntary code of conduct aimed at improving the industry in the eyes of the customer. The scheme sets out a number of benchmarks which providers must meet before they can apply for accreditation.

It is possible that the need for a quality mark will become a necessary requirement of product research. However, some leading providers have stated publicly that they will not be applying for accreditation for some time yet.

Multi-ties, the FSA&#39s comparative league tables and the Raising Standards initiative will all affect the research process. But due to the continuing need for intelligent application of selection tools, there will always be a need for meaningful, compliant and client-specific financial solutions.


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