PROD has been met with much resentment from financial planners who believe they are already doing it. However, as is so often with financial regulation, it is not the doing that matters, it is the documenting of the doing. Remember to write everything down at every stage; your client fact-find and decision-making process needs to be fully documented in order to matter.
1 Define your target markets
While those financial planners without their own products or CIP can live relatively lightly under PROD, others must pay close attention. The regulator is looking for corroboration between client, product and manufacturer from start to finish.
2 Select the product
Once you have narrowed down your target market, you are in a well-informed position to identify the product of their dreams, ensuring diligent analysis to keep PROD happy. It is the product’s histories, both financial and regulatory, that will help you understand if it is likely to meet specific client outcomes
3 Check the manufacturer’s target market
Your clients are segmented, an investment solution has been selected, and a product has been identified. Now it’s time to make sure this equation adds up from the other side.
With the manufacturer lying at one end of the equation, and you at the other, both parties must work together and agree the expected investment outcomes. This is the key to satisfying PROD. Understanding the manufacturer’s intentions means that you have assessed all the angles. You must ask yourself if this relationship really can work for all parties?
PROD and CIPs
Although it is a keystone product for many financial planners, beware the impact of PROD on your CIP. Under the rulings, you are now considered a manufacturer as well as a distributor, and you must disclose this to your clients. You will have to ruthlessly examine your own proposition as meticulously as you would an outside agency, which includes generating a process for identifying and managing the risks, stress-testing and scenario analysis, both good and bad.