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New platform rules require greater due diligence

The enforcement of the new FCA platform regulations in April increased advisers’ responsibility for the platforms they use and the need for ongoing and effective due diligence, says Barry Neilson of Nucleus

From 6 April this year, new COBS rules set out in last year’s platform paper, PS13/1, came into effect. For advisers that use platforms, the consequences of this are far reaching, as it puts the onus on them to ensure the platforms they’re utilising adhere to the new rules.

This increase in adviser obligations means advisers need to think about what practical steps they should take to ensure there are no nasty surprises further down the line. And it is worthwhile remembering that proper due diligence should be viewed as a process and never a one off event. Things can change with your business needs, the platform and regulation. Astute due diligence in platform selection can help minimise the impact.

Examining your client proposition and considering whether a platform can support it is a prudent starting point for any adviser looking to get on top of the recent changes, followed by how the platform evidences its regulatory obligations.

It is also important that the sustainability of the business model is established, but this work should only really be undertaken after a thorough examination of the client proposition has taken place. Service quality and relationship management should then be considered, followed by a review of the tools and functionality of the platform. Pricing should come last, in my opinion.

As Garry Hale, a member of one of our adviser firms puts it: “Carrying out due diligence on platform selection is not always straightforward, so bite size guidance on how best to do this is useful to all adviser firms who are keen to be on the front foot.”

Make no bones about it; the burden of responsibility now lies firmly with the adviser and for advisers who use platforms this is undoubtedly a big deal. But there are some real positives to look forward to. The changes will increase fairness and transparency, something which will benefit both clients and advisers across the country.

We have produced a white paper aimed at helping advisers navigate the due diligence maze. In collaboration with CATS compliance and training solutions we have produced a series of questions we think will help advisers in terms of knowing what to ask.

To download Nucleus’ white paper on due diligence, go to http://www.nucleusfinancial.com

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