Threesixty warns of product governance complacency

Support service provider Threesixty has warned advisers not to be “complacent” about new product governance rules, which came into effect in January last year.

The company claims that many advisory and discretionary management firms are yet to adapt to changes or remain “unaware” of the new requirements.

To combat this Threesixty has made its product governance self-assessment tool available to all regulated advisory firms, including non-clients Money Marketing understands.

The tool can help advisers “identify where they could be falling short”, the support service provider says.

Under the FCA’s new product governance requirements, firms must make sure products:

  • Meet the needs of one or more identifiable target markets
  • Are sold to clients in the identified target markets by the appropriate distribution channels
  • Deliver appropriate client outcomes

Threesixty managing director Russell Facer says: “Part of the confusion seems to be around the reference to product governance, with the emphasis being on the product. Many advice and discretionary management firms, which are classed as distributors under the requirements, may think the rules apply solely to product providers and manufacturers. This isn’t the case and there are a number of requirements which apply to firms involved in distributing products to their clients.

“A key part of the product governance requirements applies to target markets, which is likely to require some element of client segmentation. However, client segmentation exercises carried out in the lead up to the Retail Distribution Review in 2012 are unlikely to be sufficient here.”

He adds: “In its 2019/20 business plan, the FCA confirmed plans to carry out a review of how recent regulatory changes under Mifid II and the Insurance Distribution Directive have been implemented. From discussions with the regulator, we understand this is almost certainly going to include a review of how product governance has been implemented.”

Threesixty says it has bolstered the support it provides to clients with the introduction of a product governance self-assessment module.

Advisers who complete the assessment will receive a report which explains where gaps lie and where action needs to be taken.

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Facer says: “Our modular self-assessment tool is the first of its kind and has been available to clients since June, with a module covering the Senior Managers and Certification Regime. We’ve now added the product governance module, and are planning to add a suite of others in the second half of 2019, covering a range of key areas for our clients.

“We’ve piloted the new self-assessment tool among clients of different shapes and sizes, and it’s proved very useful in helping them understand where they may have gaps. They told us they’ve found it hugely valuable, not only as an education tool, but to clarify things they may have misinterpreted.

“We believe this is a robust stand-alone tool but, it’s designed to also work in conjunction with the comprehensive guidance we provide.”

Firms will also have the option of a complimentary follow-up call with one of Threesixty’s support team to discuss the report and receive guidance where necessary.

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