Although 2020 is still a couple of months away yet, the end of the year is fast approaching and next year will be a really significant one for me personally as my partner and I are expecting our first child together.
It’s very exciting news for us but there’s obviously a lot to do to get ready for the new arrival.
And for me, it has only reinforced the difficulty of getting to know an area you're not familiar with. I mean, who would have thought that prams, pushchairs and travel systems would have such a variety of different features with pros and cons for each?
PROD and achieving clarity of client outcome
Regulation is another area some of us have difficulty getting familiar with and the latest regulation to get on top of has been around MiFID II, IDD, ongoing suitability and PROD.
PROD, the product governance rules under MiFID II and IDD which came into force last year, was introduced to make sure that the investment products and insurance products recommended to clients meet the needs of one or more identified target markets, are distributed appropriately and deliver appropriate client outcomes.
With any regulation, there’s always a number of very specific rules that have to be adhered to, sometimes it’s useful to stand back and look at what the actual objective is. What I think the regulator is really trying to achieve here is simply about ensuring there is increasing focus on what’s right for the client, clarity of client outcome and making sure that that the client solution is reviewed on an ongoing basis.
Working on the platform side of the industry, PROD is really interesting for me, as it’s an area where Elevate can really come into its own and help support you with your regulatory responsibilities.
Looking at the heart of your client segmentation
I'm aware that many of you already have Elevate embedded within your business and you might already be using the platform to help meet your responsibilities under PROD.
For those of you who would like to know more about how Elevate can help with PROD, as a recap, recommendations for investment products should be researched at an individual client level under the rules. However, as we all know, it would be really onerous for you to do this for each and every client. Instead, you can centralise the process by segmenting your clients into groups with similar characteristics, then documenting the investment proposition you offer each segment. You can segment your clients in a number of different ways, for example you may choose to do this by client objectives or by age.
But the basis of your segmentation needs to be more than just levels of client wealth as a client’s capacity for loss, lifestyle and life stage need to be considered. If a client is a year away from retiring, they obviously need a different proposition from a client who is 20 or 30 years away from retiring.
So the really important thing about client segmentation is being clear about which propositions you are looking to deliver to which client segment.
Recognising the differences between each client segment, their differing needs, and how best to support these, should be at the heart of your client segmentation. The key elements of your proposition such as service, financial planning and investment management can then be tailored as you choose.
Elevate’s various client segmentation models
Elevate provides a very wide range of investments and investment approaches to fit the investment solutions you may have identified for your client segments.
PROD requires you to make sure that the investments you are choosing for your clients are suitable and in the interests of your clients and Elevate offers considerable choice and flexibility to help you meet the needs of your client segments. The platform allows you to mix and match investment approaches and accommodate a number of different investment strategies for accumulation and decumulation.
Developing an ongoing business partnership
Not only does Elevate offer a good range of investment solutions and approaches to support your client segmentation, it’s a robust platform that’s very easy and efficient to use, whether you’re looking for a one-off initial tax wrapper solution for a client or whether you’re looking to consolidate a range of tax wrappers.
Prod is all about the suitability of investment and tax wrapper solutions for each client."
PROD is all about the suitability of investment and tax wrapper solutions for each client. What Elevate does is make it easy for you to access and service the specific solutions.
If you’d like more information about PROD and how to go about meeting your regulatory responsibilities, take a look at our three-part blog series on PROD. You can find part one here.
And if you’ve not yet used Elevate and are working out how to segment your clients under the PROD rules, give Elevate a go and hopefully we can develop a brilliant, ongoing, business partnership with you.
And don’t just take my word for it. Advisers have just voted us Best Platform Provider 2019 (AUM up to £25 billion) at the annual Schroders Platform Awards.
So while I’m facing a choice with our pram selection which I'm hoping will last for the next two to three years, choosing Elevate to help meet your clients’ needs, while also complying with PROD rules, will hopefully lead to a much longer-lasting relationship.
If you'd like to find out more about how Elevate can help support you with your PROD responsibilities, get in touch.
The value of investments can go down as well as up and could be worth less than originally invested.
The views expressed in this blog should not be regarded as financial advice.
Laws and tax rules may change in the future. The information here is based on our understanding in October 2019. Your own circumstances also have an impact on tax treatment.