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The duck test

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Ducks are straightforward creatures and there is very little confusion or debate involved in whether or not you have seen one.  Such is this clarity of recognition that ducks have become a benchmark in establishing confidence in the identification of other items.

What may not be so familiar (for the moment at least) is the question of â??if it looks/ walks/ quacks like a breach of COBS 6.1F.1 (and maybe COBS 6.1E.9)â?¦â??

Yes, weâ??re back on the subject of PS13/1 (I had to claw back some space from direct platforms somehow) thanks to a thought provoking email from Tim Page of Page Russell in response to the lang catâ??s white paper Itâ??s all about you: tackling your PS13/1 due diligence requirements

Tim has kindly agreed to let us use his feedback as the basis of this blog and we thank him for that, as well as for taking the time to send his thoughts in the first place.

Page Russell has embedded the questions suggested in our white paper into their due diligence process, throwing up an unforeseen consequence.  In a nutshell â?? do the FCA rules detailed in PS13/1 prevent advisers from recommending direct platforms?

Hereâ??s how we get to that question with the help of a scenario from Tim.  This is not an issue specific to any one platform, as weâ??ll see, so no names â?? I can live without that particular phone call.

â??A client asked me to look at a particular D2C platform.  It is appealing with a simple, reasonable charging structure with no extras.  They havenâ??t got all the funds that weâ??d like but this does not need to be a deal breaker if other, equivalent funds are available.

 The problem is that this D2C platform business model is (in my experience) to direct clients into their own funds.  If that drives down the overall costs to the client whilst still capturing the asset class returns then fine. 

 But can I make a personal recommend that the client uses this platform without breaching COBS 6.1F.1 (and COBS 6.1E.9 to an extent)?� 

Timâ??s experience of the platform in question was that it was very directed with proprietary funds considerably easier to find and to buy. Being used to unbiased wrap platforms this was a somewhat jarring experience and threw a harsh light onto the subject.

The end result was that, in this case, Tim could not recommend that the client use that platform.  It was, indeed, a duck.

This all feels a little odd and uncomfortable.  The clientâ??s needs were met, at a reasonable price and with an adequate fund range.  If the client had been carrying out their own research theyâ??d have placed their business and not an eyebrow would have been raised as a result.

However, an adviser was involved. And the Duck Test was invoked.

The issue of guided architecture is not unique to any one direct platform. Does this raise the possibility that there is a broader issue of PS13/1 effectively ruling advisers out of recommending direct platforms to clients? After all, if the service the client wants is just the financial plan and not implementation or ongoing portfolio monitoring, then a self-directed platform is just the ticket.

There is unavoidable and strangely beautiful irony in being prevented from making a recommendation that is in the clientâ??s best interests in order to avoid contravening FCA regulations established to protect the clientâ??s best interests.

Jemima Puddleduck would have straightened her shawl and gone home.  On reflection sheâ??s a bad example â?? failure to recognise the sandy-whiskered gentleman as a fox does not bode well for grasping the nuances of FCA regulation and its consequences for advice on placement of self-directed investments.

The sandy-whiskered adviser sighed and explained  once again why he was unable to recommend  that Jemima invest via a direct platform
The sandy-whiskered adviser sighed and explained
once again why he was unable to recommend
that Jemima invest via a direct platform
Posted in: #general   #Platforms   #Uncategorized  

About Linda Plant

Market insight and research specialist with a grounding in front line customer service and adviser support. Insurmountable amounts of source material in, engaging and intelligent reports out. Works tirelessly to buy bonios for her beloved Labrador, Flick.