Our Approach to Consumer Duty

Background

The FCA Consumer Duty came into force on 31st July 2023 for new and existing products and services. The Consumer Duty aims to ensure that firms offer products and services that are fit for purpose and which they know represent fair value for clients.

In considering Consumer Duty, the FCA guidance suggests we need to look at the Consumer Principle and Cross-Cutting Rules, and at the Four Outcomes (Products & Services, Price & Value, Consumer Understanding and Consumer Support). Our approach should also be proportionate to the services we offer and reflect the influence that we have on consumer outcomes.

Governance & Strategy

We have appointed a Consumer Duty Champion whose role is to ensure we place consumer duty at the centre of everything we do. We have also provided staff training and reviewed our T&C scheme, statements of responsibility and the fit and proper assessments.

We ensure that our business supports favourable consumer outcomes by embedding consumer duty within all aspects of our strategy. This includes regular reviews of the overall business plan and operating strategy with consumer duty in mind, together with a review of specific aspects of our compliance procedures.

Consumer Principle

This refers to a new FCA Principle (Principle 12) which states that ‘A firm must act to deliver good outcomes for retail customers’. We do this in a number of ways:

• All our MPS portfolios have specified aims and objectives which are outcome based along with detailed mandates within which the portfolios operate. This ensures the customer experience is at the heart of our portfolio management process.
• We aim to maximise performance by selecting the best combination of funds available to support an adviser’s risk profiling of their clients. We have a process of continuous challenge to portfolio costs and obtain competitive pricing from our underlying managers.
• The service is clearly articulated to advisory firms meaning they have all the information they need in a clear format to ensure client suitability. This is reviewed annually, taking feedback from users.
• All activity is overseen by the MPS Management Team. Procedures are in place covering all aspects of the business and are reviewed according to a prescribed timetable – adherence to which is also monitored by the MPS Management Team on a monthly basis and the MPS Board on a quarterly basis.

Cross-Cutting Rules

There are three ‘cross-cutting rules’ which set out how firms should act in order to deliver good outcomes for retail customers. Firms must avoid causing foreseeable harm to retail customers, enable and support retail customers to pursue their financial objectives and act in good faith towards retail customers.

• We are very clear and fair when describing our MPS portfolios, how they operate and the parameters within which they are managed. All of our literature is written in this way and is reviewed according to a prescribed timetable. Any errors in managing the portfolios will be corrected ensuring there is no client detriment and procedures will be altered as appropriate.
• ‘Act in good faith’ is a standard of conduct characterised by honestly, fair and open dealing and consistency. This is our approach in all our communications with advisers, enabling them to be equally clear with the end users of our MPS portfolios.
• All of our processes and procedures are documented, and we have a prescribed timetable for reviewing all processes and documentation.
• All relevant staff are part of our T&C scheme, and we monitor CPD achieved which ensures ongoing competency. This is done annually and is noted on our annual actions checklist.

The Four Outcomes

The FCA have defined four outcomes:

1. Products & Services

The FCA expects all products and services that are sold to customers to be fit for purpose. They should be designed to meet consumers’ needs and targeted at the consumers whose needs they are designed to meet. We ensure this is the case by:

• Continuously monitoring our MPS portfolios to ensure they remain competitive in the marketplace, and we provide information on suitability for IFAs to use. This is reviewed more formally as part of our annual service review.
• Monitoring the underlying funds in which our MPS portfolios invest to ensure they provide value for money, taking account of the information provided by the fund managers in this area.
• Ensuring the fees charged for our MPS portfolios are competitive in the marketplace. We monitor this on an ongoing basis through our market analysis as well as through feedback from advisory firms (client firms and non-client firms).

2. Price & Value

We meet this requirement in the following ways:

• The fees charged for our MPS portfolios are competitive in the marketplace, and we monitor this on an ongoing basis through our market analysis as well as through feedback from the advisory firms (client firms and non-client firms) on an annual basis.
• Our charging is very simple and clear and takes no account of the amount an individual client invests, thereby ensuring fairness amongst end users.
• The MPS Management Team review costs and benefits to ensure they are in line with the market and continue to offer fair value to the end users.

3. Consumer Understanding

The FCA expects firms’ communications to consistently support consumers by enabling them to make informed decisions about financial products and services.

This outcome is largely outside of the scope of what we do, as all our literature is aimed at advisers rather than end clients. That said, we do support advisory firms in ensuring customer understanding by providing clear easy to understand investment solutions supported by literature and other information designed to assist with client communications. All of our processes and literature are reviewed on a regular basis to ensure they continue to meet the needs of the advisory firms and provide the information and detail that they need.

4. Consumer Support

The FCA requires firms to provide a level of customer service that meets their needs throughout their relationship with the firm. Whilst this outcome is outside of the scope of what we do, we support advisory firms in delivering good customer service by providing clear, easy to understand investment solutions supported by literature and other information designed to assist with client communications. All of our processes and literature are reviewed on a regular basis to ensure they continue to meet the needs of the advisory firms and provide the information and detail that they need.

Summary

We have always put the end consumer at the centre of what we do and we fully embrace the Consumer Duty requirements.

RSMR Portfolio Services Limited
November 2023