Consumer Duty - United Kingdom Financial Wellness

In May and June of 2023, Iwan Schafthuizen wrote a series of blogs regarding the implementation of consumer duty in the United Kingdom. Here, we gather them into a single post where you can review and get an overview of the topic.

UK Consumer Duty

The new UK regulation '#ConsumerDuty' is trending and deadlines are fast approaching! Are you ready? Manufacturers should have completed all necessary reviews to meet the outcome rules for their existing open products and services by 30th April. And don't forget, 31st July is the deadline for new and existing products or services open to sale or renewal.

With the recent announcement of £5.3m in new funding assigned to the regulation, the FCA will be undertaking sector-specific supervisory work. This highlights the importance of embedding the Consumer Duty in your organization and implementing best practices with a strong consumer focus, not just focusing on #compliance.

At Ortec Finance, we have regular talks with our clients and partners about the new Consumer Duty in which the focus lies on:

• Putting consumers at the heart of their business and focus on delivering good outcomes for them. Providing products and services that are designed to meet customers’ needs, providing fair value, helping customers achieve their financial objectives and which do not cause them damages.
• Communicating and engaging with customers to ensure they can make effective, timely and properly informed decisions about financial products and services and can take responsibility for their actions and decisions.
• Monitoring and regular reviewing of outcomes that their customers are experiencing in practice and take action to address any risks to good customer outcome.

Join me in my weekly series of Consumer Duty posts, where I will be sharing practical tools and #BestPractices on topics like #PositiveFriction, enabling consumers, and the four outcomes. Follow my posts to receive the weekly updates, and don't forget to connect with me on LinkedIn to discuss the Consumer Duty and relevant solutions for your organization. Let's work together to ensure we meet the Consumer Duty requirements and deliver the best outcomes for all customers! #FinancialWellness

Impact to the Industry

The implementation of #ConsumerDuty has a significant impact on banks and #WealthManagers, as they will need to review their business models, products, and services. Once the focus is on the client and good advice is provided, together with transparent investment decision making support; clients will be served in a good way!

Ortec Finance’s OPAL solution helps advisers and clients with their investment decision making process. With a Goals-Based approach, insight in risk and return on the short and long term, the clients’ expectations can be managed.

The realistic wealth projections provided by Ortec Finance enable the adviser and client to analyze the impact of different investments decisions on clients’ goals and decide if the risks taken are acceptable. Realistic economic scenarios which are updated regularly, lead to improved insights in the trade-off between risk and return and subsequently to better investment decisions. Our #OPAL front-end adviser solutions are built upon our OPAL #API, which makes it possible to compare several risk profiles, tailored to the strategic asset allocations of the bank/wealth manager.

Doing so, clients and advisers are enabled to talk about their #financialgoals in relation to their #investments.

Follow my posts to receive the weekly updates, and don't forget to connect with me on LinkedIn to discuss the Consumer Duty and relevant solutions for your organization.

Let's work together to ensure we meet the Consumer Duty requirements and deliver the best outcomes for all customers! #FinancialWellness

 "Fair Value"

Today already Post 3 of my weekly series on #ConsumerDuty: ‘Fair value', the amount a consumer pays for a product or service, must be “reasonable” when compared with the benefits the product or service offers.

Deadline

The new UK regulation #ConsumerDuty is trending and the next deadline for new and existing products / services open to sale or renewal is fast approaching on July 31st, 2023! In 2.5 months, firms need to have acted to "deliver good outcomes for retail customers", so there is a strong focus from the market on how to translate the rules of the Consumer Duty towards #solutions.

Fair Value

Let’s talk about ‘Fair Value'. #Fairvalue is about more than just price. Fair value translates to suitable features that foresee harm and prevents frustrating the customer in using the product or service for the duration of the product. Within Investment Decision Making, this means that banks and #WealthManagers currently have to deliver on value, but also monitor how the decisions made today as well as ongoing market conditions impact the future #goals of their clients.

Ortec Finance’s #OPAL UI and API software enables banks and wealth managers to manage this process and continuously #monitor and evaluate their clients’ goals, based upon the goals and underlying assets that they have set together with clients.

Managing your client base

Manage your client base pro-actively and alert to when your clients are off-track to achieving their goals, with the ability to filter your clients on goal priority, time horizon, goal feasibility and the current #riskprofile of the portfolio in relation to the risk attitude of your client. Ortec Finance’s OPAL solution may even provide automated solutions to get back on track again for those clients which are off-track to their goals. OPAL delivers a greater level of ongoing support to customers and higher quality relevant customer interactions. Bringing higher client satisfaction, higher client trust and higher share of wallet (AuM/FuM). Follow my posts to receive weekly updates, and don't forget to connect with me on LinkedIn to discuss Consumer Duty and relevant solutions for your organization. Let's work together to ensure we meet the Consumer Duty requirements and deliver the best outcomes for all customers! #FinancialWellness #consumerduty

 “Consumer Understanding”

This is post #4 in my weekly series about #ConsumerDuty. In recent webinars and events, the FCA is pushing the implementation of the Duty among organizations. Although #FairValue, #goodoutcomes and #foreseeableharm are trending topics, the key elements are of great importance in the implementation of Consumer Duty, and the deadline remains July 31st, 2023.

One of the #Fouroutcomes explains the element ‘Consumer Understanding’. In a world of high #inflation, increased uncertainty, lower economic growth and increased product offerings, clients’ #investment decision making has become even more complex.

Ortec Finance’s OPAL solution helps banks, wealth managers and IFA’s support their customers by helping them make informed decisions about financial products and services.

OPAL provides clients and advisers with the information they need, at the right moment and presented in a way they can understand. This is an integral part of creating an environment in which clients can pursue their financial objectives with tailored communications.

In below visual we show the aggregated risk of clients’ portfolios in relation to their risk attitude. By visualizing the total #risk of multiple investment products, we enable clients to have an in-depth and #valuable discussion about the risks they take.

It shows a client’s exposure to risk in relation to their risk attitude from a holistic point of view. By using visuals like these, banks/wealth managers/asset managers/IFA’s enable their clients to make effective, timely and informed decisions about their investments.

Follow my posts to receive weekly updates, and don't forget to connect with me on LinkedIn to discuss #ConsumerDuty and relevant solutions for your organization. Let's work together to ensure we meet the Consumer Duty requirements and deliver the best outcomes for all customers! #FinancialWellness

Delivering “Good Outcomes” to Consumers

This is the 5th post of my weekly #ConsumerDuty series. The Consumer Duty will set higher and clearer standards of consumer protection across financial services and requires firms to act to deliver ‘good outcomes’ for customers. Firms that follow the Consumer Duty have to monitor and regularly review their customers’ actual outcomes and take action to address any risks to ‘good customer outcomes’. Now, what does this ‘reviewing actual outcomes’ mean in practice, and how does Ortec Finance approach this matter?

Ortec Finance has developed the ‘Suitability Framework 2.0’, enabling firms to better comply with the Consumer Duty from a risk/suitability perspective, making sure the products and services are suitable for consumers.

The ‘Suitability Framework 2.0’ aims to take a consistent approach to formulating sound advice, compliant with regulations – not just when a product is purchased but also during the term, which is also known as automated ‘suitability monitoring.'

A key principle is that clients can have access to a better understanding of their financial decision making, due to the greater availability and interconnectivity of data. Also, decisions are simulated and discussed on a client level, offering more insight in outcomes than solely at a product level. This was also visualized in my previous post on ‘aggregated risk’.

Another key principle is linking the methodology to allow for linking multiple portfolios to multiple goals, as shown in the visual. Clients often have more than one goal and more than one asset. Ortec Finance’s OPAL solution allows holistic advice linking one pot to one goal (mental accounting), multiple goals to one pot up to multiple pots linked to multiple goals. Based upon OPAL’s state-of-the-art wealth simulations the feasibility of each individual client goal can be determined and monitored over time.

Follow my posts for updates on publishing the Suitability Framework 2.0 and my final Consumer Duty post. This month the FCA has published good practices and next steps. Want to brainstorm about the added value of OPAL & Ortec Finance in your organization? Please reach out to us and we’ll set up an exploratory meeting.

#FinancialWellness #consumerprotection

A paradigm shift

31st July is the #ConsumerDuty deadline for new and existing products or services open to sale or renewal.

In the past five weeks, I have published weekly content on Ortec Finance’s view of how several solutions can help you to better comply with the Consumer Duty by taking the opportunity to improve client engagement and efficiency.

In this final post of the series, I summarize my suggestions. I invite you to engage in the most game-changing set of rules in financial planning and investment decision-making in years. Enabling Consumers – The realistic #OPAL wealth projections enable the adviser and client to analyze and assess the impact of different investments decisions on clients’ goals and decide if the risks taken are acceptable.

OPAL enables comparison of risk profiles, all tailored to the strategic asset allocations of the bank/wealth manager, leading to improved insights in the trade-off between risk and return and subsequently to better investment decisions.

Monitoring - Manage your client base pro-actively and alert to when your clients are off-track to achieving their goals. Comprises the ability to filter your clients on goal priority, time horizon, goal feasibility and the current #riskprofile of the portfolio in relation to the risk attitude of your client. OPAL can provide automated solutions to get back on track again for those clients which are off-track to their goals. Focus on the client, not on the product - By visualizing the total #risk of multiple investment products in relation to their risk attitude, we enable clients to have an in-depth and #valuable discussion about the risks they are willing and able to take. It shows a client’s exposure to risk in relation to their risk attitude. By visualizing this risk/return trade-off on a client-level, banks/wealth managers/asset managers/IFA’s enable their clients to make effective, timely and informed decisions about their investments.

Suitability Framework – Ortec Finance developed the ‘Suitability Framework 2.0’, aiming to take a consistent approach to formulating sound advice, compliant with regulations, which is also known as automated ‘suitability monitoring'. A key principle is that clients have access to a better understanding of their financial decision-making, due to the greater availability and interconnectivity of data, which has proven to be a challenge for many organizations.

Innovations – ESG & an improved goal-intake

Innovation lies at the heart of our organization. Currently we are innovating on topics like ESG, visualizing the ESG profile of a client and product. Also, since we believe in a goals-based approach, we work with a number of organizations to improve the goal-intake process to initiate discussions with clients.

Interested in an introduction meeting or an exploratory brainstorm session? Reach out to me via LinkedIn and I would be more than happy to share best practices! #FinancialWellness #financialplanning

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