Due Diligence

Here’s an interesting quote:

“Of all the cases we have looked at over the last four or five years pretty much 100% of unsuitable cases came back with one of three answers; inadequate due diligence was one of those.”

Source: Rory Percival, FCA Technical Specialist

The FCA is therefore, not unsurprisingly, set to undertake a thematic review on due diligence for retail investment advice.

Mr. Percival gave some telling pointers:

  • Advisers can rely on third party providers for factual information, but not for opinion. So for example, if the fund manager says this is what our asset allocation is and these are our top ten holdings, that is factual information that can be taken at face value. If however somebody says this is a low risk fund, you cannot take that at face value; you have to come to your own view on what that risk level is.
  • Simply collecting off the shelf, due diligence material which has been provided by the platform providers, is an inappropriate tick box mentality and a lack of genuine regard for the client. 
  • For products, the focus would be on understanding the key risks and benefits of the product or the fund, “so that you understand what kind of clients it’s going to be suitable for”.
  • For platforms the FCA would expect an impartial assessment of the options, taking into account the client bank circumstances, what services you want to provide to those clients and which platform or platforms in the market best fit those services.


Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

You cannot simply pluck some data or report from the internet and shout ‘Eureka’ like Archimedes sitting down in his bath.

You have to gather information from reliable sources and make up your own opinion, and not rely on what others say. This takes time and requires structure.

Action Required By You

It is likely to be well into next year before any conclusions can be drawn from the review, but the implications are clear – due diligence must be an integral part of your investment propositions and processes.

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About the Author

Steve is an ATEB Director and has a deep understanding of all matter regulatory, built up over his 30 years + in the industry. With a training background and a technical brain, he overseas numerous complex projects and client implementation work.

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