This blog explores the unavoidable reality of financial planning compliance and how the right software solution can help you meet your compliance obligations, ultimately optimising your advice processes.
Compliance is an ongoing concern for any player in the financial services space, especially when advising people on their financial futures. The regulation requirements need to be considered and upheld consistently by financial advisory firms to ensure client plans are suitable, sustainable and comprehensive.
However, these requirements are ever-changing and growing, and simply staying on top of the regulatory landscape can take up considerable resources, leading to compromised financial planning. Similarly, neglecting compliance considerations and due diligence can negatively affect financial plan outcomes and put clients and advisers at risk.
Luckily, with the advent of digital solutions that streamline intensive financial processes, leveraging software to meet financial planning compliance can help advisers optimise their services overall. Let’s look at how these solutions can optimise your firm’s compliance.
The impact of regulatory compliance on financial advisers
Ensuring the financial system’s stability while maintaining market integrity and consumer protection requires regulatory compliance. But as an ongoing consideration, continual checks need to be in place to ensure advisers are compliant, and compliance risk management capabilities need to be reviewed and reworked regularly to keep you ahead of compliance shortfalls. Navigating the complex space of financial planning compliance while also offering sound financial advice can be tricky, even though sound financial advice depends on being regulatory compliant.
Why do firms need to enhance their financial planning compliance capabilities
Ever-evolving regulation has increased the complexity of reporting requirements and compliance responsibilities, meaning firms need to take extra care in ensuring their compliance capabilities are adequate for meeting their financial planning compliance obligations. Drawing on a software solution to help streamline compliance can help. Still, with the pressure regulation puts on the advisory process, ensuring the financial planning software you choose can support your specific regulatory requirements is vital for peace of mind, mitigating risk and ensuring you deliver suitable and compliant advice, every time.
When selecting a software solution to help you cover all of your compliance bases, it’s important to know how the tool assists with considerations like:
- Ensuring clients understand their financial position, including their capacity for loss
- Defining risk and aligning investment plans with client risk profiles and financial objectives
- Communicating and proving the credibility and suitability of your advice
- Tracking actions/activities for demonstrable compliance for auditors
- Justifying updates to investment plans
- Record-keeping obligations
- Refreshing and updating systems and users in line with any legislative changes
How EV can help advisers optimise financial planning compliance
Our range of financial planning software solutions covers the full spectrum of the financial ecosystem, increasing adviser confidence throughout the advisory process. EV’s complete, end-to-end financial planning toolkit, EVPro, enables you to assess, build, stress test, review and solve your clients’ plans using just one solution - and the tool is entirely compliance-friendly.
EVPro provides complete audit trails of adviser activities, ensuring your firm’s advice process remains compliant within the regulatory framework. Its consistent approach also ensures clients are at the centre of your advice service and that planning processes are consistent across your firm. In contrast, the comprehensive nature of the solution ensures all options are considered, eliminating room for adviser bias.
EVPro’s modules work together to optimise financial planning compliance, helping you improve client outcomes, identify clients at risk and create bulk client reviews at a firm and adviser level, reducing the risk of advice process misalignment and mitigating any compliance risk and associated fines. Modules can also be used independently, depending on your requirements.
Accurately assess risk with the EVPro Risk module
EVPro’s Risk module offers an objective-based risk profiling solution, including various psychometric, behavioural and knowledge-based questions that have been designed with FG11-05 requirements in mind - the core of which being to establish what risk a client is willing and able to take when it comes to selecting investments.
How does EVPro Risk help advisers cover financial planning compliance?
Here are some of the key compliance benefits you can expect from our Risk module:
- Separate Attitude to Risk, Knowledge & Experience, Capacity for loss and ESG outputs to keep client objectives and their capacity for loss as two separate considerations.
- Ensures the accuracy of client risk preferences through consistent risk descriptions and objective-based methodology.
- Provides questions that use simplified, easy-to-understand language (so that clients don’t need to have advanced financial or mathematical knowledge to answer them), to assess a client’s attitude to investment risk and match their level of risk with the appropriate risk category.
- A clear audit trail on knowledge and experience factors and the final capacity for loss for use in additional analyses.
Define investment suitability with EVPro Invest
Once risk has been accurately assessed and defined, ensuring the suitability of potential investments clients could consider is the other side of the compliance coin. The EVPro Invest module takes your client’s financial position into account when helping you create investment solutions, ensuring your advice is consistent with the client’s financial objectives and risk appetite.
How does EVPro Invest help advisers ensure investment suitability?
Here are the main benefits for financial planning compliance offered by EVPro Invest:
- Term-based risk profiling with results, benchmarks and profiling taking into account the term of growth objective.
- Provide firm-specific risk benchmarks that ensure suitable advice is given across a firm, consistently profiling multi-layer funds, showing the risk of each fund, portfolio, product and any combination of products.
- Risk rating for both accumulation and decumulation client objectives, while also easily revealing fund or portfolio risk and return.
- Flexible assessment of the risk of individual products together or as a single portfolio, in relation to risk targets, allowing advisers to efficiently communicate all options available to a client.
Ensure client plans are on track with EVPro Goal
The EVPro Goal module helps you set up plans with client objectives in mind, ensures that you’re going in the right direction per client objectives, and shows the likelihood of clients meeting their goals. This allows you to better set client expectations and helps you efficiently communicate plans to clients, ultimately ensuring client-adviser alignment, which makes clients meeting their financial life goals easier.
How does EVPro Goal help advisers ensure client goals stay on track?
Here are the key ways that EVPro Goal supports your financial planning compliance requirements:
- Robust capacity for loss cash flow metrics, revealing not only available capacity but also if assets are adequate to cover any gaps to the target level.
- Confirms the likelihood of expenses being met every year with robust stress-testing against over 1000 different market scenarios using EVPro Solver.
- Shows the probability of a plan’s success, taking into account the risk and reward of each asset, fund, portfolio and product, across a client’s lifecycle.
- Realistic pricing of annuities based on a yield model that accurately calculates future annuity prices.
- Considers tax allowance, tax charges and tax-free cash withdrawn from pension products, allowing for enhanced calculations for better result probability.
Taking client plan reviews to the next level with EVPro Review
The FCA’s Consumer Duty is causing adviser firms to fear the Financial Ombudsman will regulate with hindsight. However, with EVPro Review, advisers and firms have the evidence at their fingertips to demonstrate that they have done everything in their means to ensure their clients are on track, and ultimately keeping the regulator happy.
Available as a bolt-on to the EVPro Goal module, this client review tool allows you to analyse, amend, and communicate your clients’ financial plans with a practical and easy client management framework while understanding the robustness of your overall advice business:
- Oversight - create a consistent view across your business and identify where there could be issues with your clients’ financial plans.
- Regulation - provides a clear understanding of what the overall firm position is from a risk perspective of potential client complaints.
EVPro Review takes the support of your financial planning compliance requirements to the next level.
Summary: Future-proof compliance with EV
Regulatory compliance is an unavoidable part of financial planning and keeping within the regulatory framework ensures advisers and firms can most appropriately serve their clients. While, at times, tedious and complex, ensuring financial planning compliance is crucial to the success of any financial plan and for your firm’s reputation and risk management. The capabilities of software solutions like EVPro can help you confidently advise clients on the best possible way to reach their financial life goals, both now and in the future.
