The impacts of TCFD on the wealth management space

Climate-related financial risks

In recent years, there has been growing recognition of the importance of climate-related risks and opportunities for the financial sector. The Task Force on Climate-related Financial Disclosures (TCFD) has emerged as a crucial framework that enables organisations to evaluate and disclose their climate-related financial risks. This article aims to explore the impacts of TCFD on the wealth management space, highlighting how BITA Risk can assist wealth management firms in navigating this evolving landscape. 

The TCFD was established in 2015 by the Financial Stability Board (FSB) to enhance transparency and improve the understanding of climate-related risks and opportunities in the financial sector. The framework provides recommendations for voluntary, consistent climate-related disclosures across four key areas: governance, strategy, risk management, and metrics and targets.
Impacts of TCFD on wealth management

Enhanced risk assessment and management
With the TCFD framework, wealth management firms gain a structured approach to identify, assess, and manage climate-related risks. By integrating climate risk considerations into their investment decision-making processes, firms can more effectively safeguard their clients’ investments against climate-related threats. TCFD-aligned disclosures provide investors with the necessary information to understand and evaluate the potential impact of climate risks on their portfolios.

Investor demand and preferences
As climate change gains increased attention, investors are increasingly interested in aligning their investments with sustainable and climate-conscious strategies. According to a 2020 survey conducted by Morgan Stanley, 85% of individual investors expressed interest in sustainable investing. TCFD-aligned reporting allows wealth managers to meet this demand by providing transparency and evidence of their commitment to sustainable investing practices. By doing so, wealth management firms can attract new clients, retain existing ones, and stay competitive in an evolving market.

Regulatory landscape 
Regulators worldwide are actively incorporating TCFD recommendations into their policies and regulations. For instance, the European Union’s Sustainable Finance Disclosure Regulation (SFDR) requires financial market participants to disclose the integration of sustainability risks, including climate risks, into their investment decision-making processes. Similarly, other jurisdictions are following suit, creating a global push towards climate-related financial disclosures. Compliance with TCFD recommendations positions wealth management firms favourably in meeting evolving regulatory requirements.

Long-term value creation
By integrating TCFD into their operations, wealth management firms can unlock long-term value-creation opportunities. Climate change can impact asset valuations, profitability, and business models across industries. Through TCFD-aligned disclosures, wealth managers can identify investments that are well-positioned to capitalise on the transition to a low-carbon economy. By focusing on companies with sustainable practices, wealth management firms can generate positive returns for their clients while aligning with broader environmental objectives.

BITA Risk: assisting wealth management firms
BITA Risk, a leading provider of risk management solutions, offers comprehensive tools to support wealth management firms in complying with TCFD recommendations and navigating the associated challenges. Here is how BITA Risk can assist:

1. Climate risk analytics:
BITA Risk provides analytics to assess climate-related risks across investment portfolios. By leveraging vast amounts of climate and financial data, the platform enables wealth managers to identify and quantify the potential impact of climate risks on investment returns. These insights empower wealth management firms to make informed decisions, optimise asset allocation, and mitigate risks associated with climate change.

2. Scenario analysis:
BITA Risk’s platform enables wealth managers to conduct scenario analysis, a critical component of TCFD recommendations. Scenario analysis helps firms assess the resilience of their investment portfolios under different climate-related scenarios, such as transition and physical risks. By stress-testing portfolios, wealth managers can identify vulnerabilities and adjust their strategies, accordingly, ensuring the long-term resilience of their clients’ investments.

3. Reporting and disclosures:
BITA Risk offers reporting capabilities that facilitate TCFD – disclosures aligned with the CET and IA templates. The platform generates comprehensive reports that highlight climate-related risks, governance frameworks, and sustainability strategies. By streamlining the reporting process, wealth managers can efficiently produce high-quality disclosures that cater to the evolving needs of regulators, investors, and other stakeholders.

The TCFD framework has significantly influenced the wealth management space by fostering improved risk assessment, meeting investor demands, navigating regulatory requirements, and driving long-term value creation. Wealth management firms can leverage solutions like BITA Risk to effectively implement TCFD recommendations. By embracing the TCFD framework and incorporating climate-related considerations into their operations, wealth management firms can enhance their risk management practices, attract clients, and capitalise on the opportunities presented by the transition to a sustainable, low-carbon economy.

If you would like to discuss any of the points raised here, please contact us at or see more information on our solution here.

Reporting on responsible investing, ESG, ethical, carbon and stewardship – Why do you need it?

Responsible investing, ESG, ethical, carbon and stewardship

Daryl Roxburgh – President and Global Head BITA Risk®, part of the corfinancial® Group, investigates reporting on responsible investing, ESG, ethical, carbon and stewardship, why do you need it and how do you do it?

Responsible Investing (RI) reporting by private wealth managers is rising in importance as society as a whole takes more interest in how invested companies behave, their impact and what they, as investors, can do to influence them. Expectations around behaviour regarding these issues have risen exponentially in the recent past, and so has the general understanding of climate change risks. As a consequence, wealth managers need to describe and demonstrate that they are seeking positive change through RI and minimise their Environmental, Social and Governance (ESG) risks.

As interests rise, so too have the terminology and the metrics to measure RI. Within the financial domain, this has been driven by investors and regulators, as well as companies themselves, who recognise that a successful future is inextricably linked with all the elements of RI. Indeed, in many cases, client utility is not just linked to investment performance; it is also linked to RI.

BITA Risk thinks of RI – and therefore, management and reporting – in four groups:

  1.  RI risks – identifying which portfolio investments face risks due to climate change, social media, and environmental taxes. This may also include ethical exposures in controversial areas and general involvement in controversies. Climate change and carbon metrics fall into this group too.
  2. RI opportunities – whether new emerging technologies to counter or adapt to climate change or existing products and services that can easily adapt.
  3. Client preferences – the things that are particularly important to the client. Whereas points one and two above are a fundamental part of investment management, client preferences are an additional layer and may cover ESG, ethical and product factors as both positive and negative screens.
  4. Stewardship – what is the wealth management firm doing to demonstrate its active role in driving the issue of RI in the firms invested in. This demonstrates value add.

This data needs to be at the investment manager’s fingertips for a client portfolio to make it an integral part of the investment process, as well as in reporting.

Most, if not all, investors would like to have ESG and RI data and measurements included as a standard part of the reporting process woven through it, like with other metrics. This is particularly pertinent when it comes to the next generation of investors who consider RI performance to be on par with performance – and rightly so.

The regulator, too, is another key driver of ESG reporting. The EU implementation of the Sustainable Finance Disclosure Regulation (SFDR) in March 2021 effectively created three fund designations (Article 6, Article 8, and Article 9) based on the level of the investment manager’s incorporation of ESG characteristics in the investment decision-making process. This is matched in the UK by SDR and TCFD, which brings a detailed level of carbon and climate reporting. These regulations require certain disclosures from investment managers about the implications of sustainability risks on both their funds and firms.

The dovetailing in demand from investors and regulators alike has led to vast improvements in RI metrics and frameworks to at least attempt a common set of standards that is meaningful to all and means that investment management companies are comparing like with like when it comes to different companies and match that to investor profiles. What has to be remembered is that ESG assessments are aligned with the research methodology of a data vendor, and these are 1) not necessarily the same, and 2) when aggregating detailed factors up to an overall score, the weighting and methodologies can be very different. So, it should not be surprising when different vendors have different scores, they may not be measuring the same thing.

Indeed, RI represents an opportunity for investment management firms to distinguish themselves from competitors and provide something meaningful and actionable to their clients. Alignment with client goals as well as risk and suitability frameworks are key, making investment returns and RI crucial going forward.

Getting ESG reporting right is important. It affords investment managers the chance to enhance their investment decision engine, fine-tune customer reporting capabilities, and augment their internal stewardship processes to meet and potentially exceed client expectations. RI of all types is needed in increasingly equal measure and a robust reporting tool is crucial! In our second article in this series, we will look at how to make this work in practice, dealing with data and giving investment managers the key tools.

If you would like to discuss any of the points raised here, please contact BITA at or see more information on our solution here.

Consumer Duty – how BITA Risk can help

Wealth Management

Getting good client outcomes should not be down to luck, but the result of following a defined data analysis and exception management process to test outcomes against targets and act on alerts to potential outcome spoilers.

Following our recent article on Consumer Duty – seven steps for successful outcomes, Daryl Roxburgh – President and Global Head BITA Risk® part of the corfinancial® Group presents how BITA Risk helps firms address Consumer Duty demands.

Getting the right outcomes should be the result of following the core principles that makeup Consumer Duty. 

Understanding the client
This means looking at the client’s affairs from more than just a risk and suitability standpoint. True understanding of the client means looking at multiple aspects considering: risk, objectives, constraints, capacity for loss, knowledge and experience, and ethical and ESG preferences. In some cases, this will require a degree of investor education. BITA Wealth Profiler® provides the ability to map the client profile and match it to the firm’s investment proposition. Ongoing monitoring and automated proposals should follow; all data should have been integrated and analysed to reach that point and the risks of the proposed investments would be fully explained.

Foreseeable harm
Foreseeable harm should be considered at the overall portfolio and individual investment level. Harm can be considered as causing the portfolio to miss the client’s objectives, very often measured against the firm’s central investment model or a defined benchmark. BITA Wealth Monitor® helps mitigate foreseeable harm through continual automated assessment of positions and portfolios, along with where the risks are acceptable. Quantitative risk checks at portfolio and asset level, portfolio construction and investment policy tests, pre and post-trade, alert the user to exceptions on every portfolio, every day, not just a random periodic sample. Where there is a known reason for the exception this is documented in the system, providing a full audit trail. With over 50 tests available in BITA Wealth Monitor, including value, there is coverage for a wide range of investment approaches.

Consistent outcomes
The use of BITA Wealth Monitor to mitigate against foreseeable harms has been proven to lead to greater consistency of performance outcomes. The extension of the Monitoring suite and analytics to performance and ex-post risk analysis enables insight and understanding of systemic issues within the client base, such as outlier portfolios, managers, mandates or groups of clients.

Early risk and deviation identification allow for early action. BITA Wealth manages all of this at a granular level, with standard reasons and free text justifications making up actionable structured data.

Management information and oversight
Finally, getting all the data analytics together to be able to understand the client, provide consistent outcomes and identify foreseeable harm means that managers glean greater insight. This can be in terms of client vs peer group and model, performance and risk analysis, or manager vs peers, risk and return analysis. It requires daily, enterprise-level monitoring of portfolios across all foreseeable harms for all businesses, locations, teams and managers and makes for a better level of costs and charges review across the client base.

Using BITA Wealth gives consistency of client assessment and means matching to the investment proposition is much more accurate. This together with the ongoing portfolio monitoring BITA Wealth provides, should lead to consistent client outcomes within an expected range that are relative to the benchmark as well as recorded explanations where there are factors that might prevent a positive outcome. In this way, managed data leads to delivered Consumer Duty.

If you would like to discuss any of the points raised here, please contact us at or see more information on our solution here.

Consumer Duty – seven steps for successful outcomes

Steps for success

By Daryl Roxburgh – President and Global Head BITA Risk® part of the corfinancial® Group

Wealth Management

Consumer Duty is in the post – and due imminently! The deadline for new and existing products or services open to sales or renewals is 31 July 2023, with closed products and services coming under the rules at the end of July next year. 

As with any new regulation firms will need to cope with an array of demands and challenges. It can feel overwhelming. But successful implementation actually makes for better business, better efficiency, and positive outcomes.

Getting the right outcomes should be the result of following the core principles that underlay Consumer Duty

  1. Understanding the client
  2. Foreseeable harm
  3. Consistent outcomes
  4. MI & oversight

The end result should be the ability to provide a better match of client and investment and the delivery of an investment outcome in line with expectations. Ongoing monitoring of portfolios should mean consistency when it comes to achieving expected outcomes or returns. And if it looks likely that something might impact that outcome then the monitoring will allow for early action and record what action was taken.

The provider also needs to tell their customers when they have something better or more suitable in their portfolio – and facilitate a switch if required.

Obviously, this entails work on the part of the provider to make sure that process efficiency and data analytics are powering the proposition forward as they should be. Getting that right makes it more likely that the investment choice is the right one in the first place. The monitoring meanwhile makes sure that outcomes for all investors are as close to expectations as they could be. None of this is easy but getting it right goes beyond compliance; a happy customer with a positive outcome is a returning customer which is good for business!

However, this array of positive outcomes will not happen by accident. Indeed, it needs to be designed into processes to make sure that a firm is both compliant and forward-looking. Much of this relies on proper data management and analytics – the devil is always in the detail!

The key, we think, is to support the client and make a good outcome more likely by having in place a robust tracking system, focusing on the investment management of a portfolio. This should provide warnings if something is not as expected and requires investigation so as to steer a better course in good time and provide that much-lauded good outcome for the client.

This may all sound like common sense, but it relies on having the right data and processes in place. Below we outline the seven steps that we think are key to getting an optimum outcome testing regime in place.

The seven-step process

1. Define the outcome:
Information on a client’s requirements for a particular portfolio can be assessed and used to match the client into the firm’s investment proposition. Factors can include attitude to risk, portfolio objectives, capacity for loss and other factors such as sustainability, liquidity and time horizon.

The combination of these factors defines the parameters for the expected outcomes and provides the guard rails for monitoring. All of this should be played back to the client in the investment proposal, to see if it meets their understanding.

The proposal then becomes an outcome checkpoint that can be referred back to.

2. Apply a set of objective and consistent tests relevant to that outcome:
The tests that check whether the portfolio is within the guard rails fall into two groups, leading indicators, and ex-post indicators.

Leading indicators look at how a portfolio is constructed and are essentially all about foreseeable harm. This includes factors like risk – volatility and tracking error – asset allocation, concentration risks, research list compliance, and asset checks such as high risk, rare holdings, and equity liquidity. Being alerted early to outliers against these tests enables rapid action.

The ex-post indicators, meanwhile, look at portfolio outcomes. Typically, one-year and three-year absolute and relative performance are checked, with options to calculate ex-post risk and tracking error. The idea is to reveal patterns in outlier performance and trends, and monitor deterioration and rectification. In addition to performance, yield can, where appropriate, be monitored against target.

3. Measure and record the test results so that deviation can be assessed and to inform actions for improvement.
All tests are run nightly, and the user has access to the results on their dashboard daily, giving calls to action. Results for every portfolio for each test are stored weekly providing trend reporting and historic checks at portfolio and enterprise levels.

The result is visibility and the ability to target significant, aged, and consistent issues because investment managers can see where issues lie, and how to assess and correct them.

4. Employ a consistent methodology for root cause analysis.
The first checks for root cause analysis, when the portfolio outcome is not in line with expectations, would be the current monitor tests’ statuses. After that, the past year’s history of test status and the known exceptions on the portfolio would be looked at. Lastly, a check of its performance against its peers for the same risk and objective for the same team and across the firm.

Together these provide a consistent framework for initial review.

5. Manage exceptions
Within every book of business, there are exceptions. Managing them at a granular level with standard reasons and free text justifications to make up structured data that can be analysed, makes sure that exceptions do not become the rule. This provides evidence of a review of issues with the portfolio and the actions agreed.

6. Routine reporting to review outcomes and manage areas of concern.
Reports can be run at any time giving flexibility, but routine reporting provides month-on-month and one- or two-year trend analysis. Used in this way and in conjunction with the number of days out analysis on failed tests, clear pictures of systematic issues can be identified and addressed.

7. Report on the outcome and check satisfaction.
Having captured the client’s requirements and setting their expectations at the start of the process, the annual review report plays back progress to the client and provides a checkpoint. Just as the investment proposal can be run at the desktop in seconds at any time, so can the annual review.

In the report, the current portfolio is compared to the assigned model and a series of checks is provided to the client:

  • Performance against the expected range as set in the client mandate and investment proposal
  • Asset allocation vs assigned model
  • Monitor test status checks and known exception text where applied
  • Trend reports on key monitor tests
  • Manager comments on key sections

By following these seven steps the investment manager gains much better insight into the client’s needs and objectives and can measure against those parameters at any time.

Ongoing testing of the client portfolio against mandate, model and investment policy with leading indications also alerts to foreseeable harm that can be mitigated or documented.

In addition, enterprise helicopter views to identify systematic issues within the firm and aid their resolution, plus an annual client checkpoint that looks at performance against an expected range of returns, can be successfully carried out to show a positive outcome.

If you would like to discuss any of the points raised here, please contact us at or see more information on our solution here.

Hawksmoor Investment Management signs up for BITA Risk enhanced portfolio monitoring

Hawksmoor Investment Management, has signed up for BITA Risk’s enhanced portfolio monitoring solution
Hawksmoor Logo

London, 5th June 2023 – BITA Risk, part of corfinancial, announces that specialist investment and fund management business, Hawksmoor Investment Management, has signed up for BITA Risk’s enhanced portfolio monitoring solution – BITA Wealth.

BITA Wealth delivers the analysis, data and management intelligence required to help towards delivering the requirements of the FCA’s newly introduced Consumer Duty, spotting foreseeable harm exceptions, accelerating their remediation and providing robust governance arrangements that provide and evidence good customer outcomes.

Hawksmoor’s CEO, Sarah Soar, commented: “We selected BITA Wealth after an extensive RFP process due to its reputation in delivering consistent client outcomes. The platform gives us enterprise oversight and control – enabling us to efficiently manage the risks of portfolio drift. The software will further empower our advisors with intuitive, relevant portfolio analytics that facilitate freedom within an established investment framework. In a nutshell, BITA Wealth will help us scale and manage our business as we continue with our acquisition strategy and bring other investment management firms into the Hawksmoor stable.”

“Our software will help ensure a consistent approach to oversight across Hawksmoor’s diverse range of investment managers. BITA Wealth will also support the implementation of Hawksmoor’s overarching investment strategy and further solidify their excellent risk management processes,” commented Daryl Roxburgh, President and Global Head, BITA Risk. “Underpinned by full exception management and approval processes, we help firms grow through demonstrable risk management, improved client retention, better M&A impact analysis, and protection against reputational risks.”

Hawksmoor Investment Management is a highly acquisitive wealth management firm, specialising in providing high quality discretionary management services for private clients including trusts, pension schemes and charities.

Consumer Duty – are you ready?

Consumer Duty - are you ready?

By Daryl Roxburgh, President and Global Head, BITA Risk® part of the corfinancial® Group

Wealth Management

Consumer Duty is imminent! But what are the practical implications of this legislation?  What needs consideration and how ready are you? 

The basic thrust of Consumer Duty is around best practices.

It is seen as a key facet of the FCA’s three-year strategy to drive good outcomes for consumers. A key part of that is that firms must be able to evidence compliance and in doing so collectively set a standard for the industry as a whole.

Firms need to:

  • Act in good faith towards retail customers
  • Avoid causing foreseeable harm to retail customers
  • Enable and support retail customers to pursue their financial objective(s)
  • Make sure they can deliver good outcomes overall business activities.

Consumer Duty will join up areas that currently are siloed and/ or have low visibility. In doing so the investment process from assessment of objectives through to investment performance will become more transparent and thus firms will have the ability to measure how they are doing when it comes to outcomes at each stage of the process.

Firms have a duty of care towards clients. To achieve this, they will need to assess how they will relate to customers not just through the products that are sold, but how they came to that point and decided what was and was not suitable. The onus is now on providers to tell their customers when they have something better or more suitable in their portfolio – and invite them to make the switch if they choose to do so.

They should also be able to pinpoint how and when they flagged the possibility of something going wrong, what they did about it and when.

This all forces best practice and is the core of Consumer Duty; positioning the right products and services to the right people at the right time and cost to achieve better outcomes across their financial lifecycle.

To do this leveraging data and insight will become more important than ever. At each stage of the process there should be a check of the outcome – not just investment ones – and data available to enable root cause analyses of issues. And, if a firm cannot evidence that it evaluated the customer’s needs from a whole-of-life and holistic viewpoint then they fail in its duty. The means to aggregate the customer’s financial position, and automate the analysis for both the consumer and the provider is a must, so as to provide the data-driven insights that can underpin individual, personalised propositions, as well as evidence that those insights were provided and that the portfolio was properly monitored to avoid foreseeable harm and provide a positive outcome.

Without these data analytics capabilities meeting Consumer Duty requirements will be nigh on impossible. More than that, being compliant with Consumer Duty also represents an opportunity for growth via open-finance, data-driven and customer-centric business models that will position firms well to capture a greater share of wallet, provide operational efficiencies and position them well for profitability.

But have you readied your data collection and analytics capabilities? What do you need to do? Are you ready?

We will shortly be publishing our view of Consumer Duty – Seven Steps for Successful Outcomes.

If you would like to discuss any of the points raised here, please contact us at or see more information on our solution here.

Portfolio risks and suitability – the intelligent anticipation of the unexpected

Meerkat watching

Daryl Roxburgh, President and Global Head of BITA Risk® part of the corfinancial® Group

Wealth Management

In a discussion last week with a CIO, he said, “investors may be disappointed in returns – due to the market – but they do not want to be surprised”. This prompted us to write about how to avoid surprises, or “the intelligent anticipation of the unexpected”. 

Identifying, understanding and mitigating portfolio risks will help remove surprises and lead to more consistent portfolio performance. This does not have to mean 100% rebalancing to a strict model, something that is not always appropriate or possible in HNW and UHNW client portfolios. More than with the right oversight and insight, managers can have freedom within a framework to deliver good suitable outcomes to their clients.

Automating the analysis of portfolios and assets to identify those that fall outside client mandate or investment policy does six things:

  1. Focus attention where needed
  2. Prioritises action by criticality
  3. Identifies patterns or systematic behaviour
  4. Enables known issues to be validated with the client and removed from the exceptions list
  5. Reduces data prep time by 80%, effort that can be better focussed on actions
  6. Puts the tool on the IM desk, making it part of daily portfolio management

Checking beyond basic front office system drift and client restrictions, we would suggest considering eleven different groups of monitor tests, to find the proverbial needle in the haystack before it becomes a risk:

  • Portfolio market risks
  • Concentration risks
  • Bond metrics
  • Performance deviation
  • Goal achievement deviation
  • ESG and ER and preferences and restrictions
  • Asset allocation
  • Asset class characteristics
  • Research and non-research list assets positions
  • Asset attribute flags e.g., risk, liquidity, rare, restricted
  • Admin flags e.g., review due, dummy identifiers

The appropriate and relevant tests will depend on the firm’s investment proposition and business model. Often, different business units served by the same installation will only have a few tests in common.

You might know that 80% of your portfolios have a minimum of 80% invested in assets on the research list, but how concentrated is the money not invested in the research list?  Are there significant positions either at the firm or branch level that are not researched, and are these a risk?

Do certain teams or branches have systematic outlier characteristics? Do certain managers have a very high proportion of portfolios with a CGT exception?

Monitoring these daily not only gives the IM the heads up that they need to check something when it occurs but also provides a trend report through time on the resolution of issues, so continual analysis helps stay on top.

Just as important is a structured process of recording accepted and known exceptions. These not only need internal checks but should also be validated with the client on a periodic basis, closing the loop.

The result of the use of this data, analysis, and process can be expected to be:

  • Better delivery to client expectations and suitability of outcome
  • Reduction in unexpected risks
  • Improved consistency of outcome
  • Demonstrable automated risk management process to attract clients, advisers and IMs
  • Better understanding of the relationship between risks and return in the business.

The frequent comment about Consumer Duty is that much of it is just good business practice. The management information listed above can evidence good outcomes and that the processes are in place to ensure they are being beneficial to the client and firm alike.

If you would like to discuss any of the points raised here, please contact us at or see more information on our solution here.

A central investment proposition – no guarantee of consistency of outcome

Jigsaw puzzle piece with Consistency is the key concept

Daryl Roxburgh, President and Global Head of BITA Risk® part of the corfinancial® Group

Wealth Management

A Central Investment Proposition (CIP) is no guarantee of consistency of outcome, whether measured by performance, risk, or cost. In this blog, we review two case studies where BITA Wealth helped deliver the CIP and resulted in more consistent results – key to Consumer Duty obligations. 

Case A – freedom within a framework. The firm had autonomous managers, central asset allocation models and a non-mandated research list. When we undertook an initial assessment of portfolios, it was found that there was:

  • Little portfolio risk consistency within risk bands.
  • An issue with concentrated portfolios.
  • Patchy take up on the research list.
  • A high variation in portfolio performance.

Asset allocation drift had previously been relied upon as the key metric and was measured by the front office system.

Following an analysis phase, looking at the portfolio risk and construction characteristics across the book and by mandate in BITA Wealth, initial guidelines were set for each risk category. These covered portfolio risk (volatility), maximum holding weights by asset type, off-research list percentages, high volatility holdings, tracking error and asset allocation against the assigned model.

BITA Wealth gave investment managers a dashboard on which they could identify significant outliers for each metric and the tools to model portfolio changes and bring them into line. Where this was not possible, they could record a known exception and apply a deferral against a test. The governance and oversight team had information instantly available, so could focus their time on reviewing critical outliers and managers’ progress, rather than having to collate data.

Within a year, the external party that reviewed the firm’s client performance and risk against their peer group commented positively on the significant improvement in the consistency of outcomes.

Case B – rebalanced models. The second case study is a little more surprising. A firm was running 300,000 plus client portfolios, all rebalanced to model on a weekly basis.

They were consistently finding, each quarter, that around 10% of portfolios were outside the acceptable deviation from the model performance.

They had a team of six consultants working on investigating and seeking rectification. Given that in many cases,  they were looking at outlier portfolios months after the event that triggered the performance deviation, there was a lot of time spent trawling through historic data.

Using BITA Wealth to analyse all the portfolios down to holding level in an analysis phase and then on data through time, a series of issues were discovered in the process that contributed to the performance deviation. Because of the quarterly review cycle, these were not identified at the time and so resulted in performance deviation. Moving to daily monitoring with BITA Wealth and exception management, would enable next-day rectification of issues and significantly reduce any performance impact.

In some instances, the performance deviation was to be expected, such as the closure of the account mid-quarter or a client holding cash pending investment or withdrawal. However, these had not been consistently identified and marked as known exceptions previously, and so the performance team was required to investigate.

In other cases, cash had come in and not been invested on a timely basis – daily monitoring not only resolved this but enabled root cause analysis of what was causing these failures.

Lastly, the commonality of holding weight between the model and each portfolio was tested daily. This identified the third primary cause of performance deviation. While portfolios were rebalanced to the model, in a number of cases, the portfolio value was significantly below the stated minimum. Given that the portfolios were invested in a wide spread of direct equities, this meant that for assets with a large price per share, these smaller portfolios were not in line with the model weights. This was a more fundamental business model issue. Again, having been identified through the monitoring, the affected portfolios could be carved out for separate action.

These brief case studies give an insight into the challenges of running a Central Investment Proposition, gaining adherence, and ensuring that the outcomes are as consistent as expected.

If you would like to discuss any of the points raised here, please contact us at or see more information on our solution here.

Consumer Duty: How to prove it

Girl sitting indoors doing mobile payment online.

By Daryl Roxburgh, President and Global Head, BITA Risk® part of the corfinancial® Group

Wealth Management

While plans had to be drawn up by last October, Consumer Duty comes into effect on the 31st of July 2023.

The Consumer Duty

  • A new Consumer Principle that requires firms to act to deliver good outcomes for retail customers.
  • Cross-cutting rules require firms to act in good faith, avoid causing foreseeable harm, and enable and support customers to pursue their financial objectives.
  • Four Outcomes rules require firms to ensure consumers receive communications they can understand, products and services meet their needs and offer fair value, and the support they need

Key to meeting Consumer Duty obligations is assessing, testing, understanding and being able to evidence the outcomes that a firm’s clients are receiving – and having the management information to evidence that products are delivering outcomes consistent with the duty across all clients. Where this Is not the case, there is the need to identify clients or groups of clients that are outliers, and to understand why.

Firms have to ask themselves, are they using the same level of management information and systems to inform their Consumer Duty obligations as they are their sales and product development?

In talking to many firms, we find they have challenges in collecting the data and even when they have, it is in disparate spreadsheets. This prevents the data overlay necessary to understand patterns,  problems and solutions. It is also often generated to long after the fact, to enable easy rectification of issues.

In this blog, we are focusing on foreseeable harm, value and quantitative outcome issues. We have assumed that the client’s needs have been assessed in terms of quantifying any goals and putting these into the context of not only attitude to risk, but broader suitability factors in arriving at the right investment proposition. This proposition has then been played back to the client in such a way that they can understand the risks that they will take. As a senior investment manager said, “they may have a disappointment (due to the markets), but I do not want them to have a surprise”.

Consistency of performance outcome and cost of outcome are cornerstones. Logically, foreseeable harm can then be considered as a factor that could result in a performance or cost deviation from the norm for the portfolio mandate within the firm. So, there is a two-step process, identify potential foreseeable harms – rectifying or acknowledging – and then monitor outcomes. The outcomes should be reviewed separately for those with acknowledged variations and for those expected to conform.

This process creates a feedback loop, identifying clients or groups of clients that have suboptimal returns for their risk mandate and separating out those for which there are known exceptions. By combining data from foreseeable harm factors with risk and return outcome statistics, MI analysis can lead to rectification of systematic issues and discussion of portfolio specific issues with the client.

BITA Wealth brings all of this data together at the Investment Managers’ desktops and enterprise views for management, compliance, and governance. With over 40 portfolio monitor metrics to choose from, the reporting will reflect the metrics key to the firms’ investment propositions.

While many of these foreseeable harm factors are well known as issues, not all firms are able to put them into the context of performance impact. Typically, BITA Wealth will monitor some six to ten portfolio risk and construction factors, along with asset allocation, daily.

Reasons for known exceptions are recorded and can be reported and investment managers have the tools to model rectification, where possible. This can is then overlayed on performance and risk outcomes, giving direction on factors that may have led to deviation from expected performance across groups of clients and possible routes to rectification.

We have interfaced BITA Wealth with most of the leading investment management systems to provide this first and second line of defence for many firms, and today, some £180 billion of private client AUM is monitored and checked in this way. This provides the management information not only to meet Consumer Duty criteria, but also insight into your firm and to ensure that good client outcomes are delivered.

If you would like to discuss any of the points raised here, please contact us at or see more information on our solution here.

The differentiation potential within consumer duty

Reflection of Canary Wharf Skycrapers
By Daryl Roxburgh – President and Global Head, BITA Risk® part of the corfinancial® Group
Wealth Management
Late July saw the Financial Conduct Authority unveil the finalised version of its new Consumer Duty regulations, setting in motion what the regulator has termed a “paradigm shift” in its expectations of the UK’s retail financial institutions. Highly laudable though its aims certainly are, the timeframes for implementation are short and the challenges around proving compliance numerous, with firms having to have plans in place by the end of October.
I say ‘proving’ with purpose. Any reputable firm will have surveyed the guiding principles underpinning the new regime and see little that will not already be in their corporate DNA. Clear communications and meaningful customer support, fair charging, and a client-centric approach to providing financial services and products with a focus on good outcomes are nothing new to this country’s already tightly regulated – and highly respected – financial services sector. Developing capabilities to meet the regulator’s expectations for evidencing all of this may well be, however.
The FCA estimates that the implementation costs for the sector will be as high as £2.4 billion and wealth managers can be expected to bear much of the brunt of the pain due to the wide-ranging and often very long-term relationships they have with their clients. Dizzying changes to wealth demographics and investor preferences, along with an economic outlook which is uncertain to say the least, further complicate the picture.

Segments of one

Never has the old saying that each client is “a segment of one” been truer. How then to prove the consistency of outcomes among increasingly diverse client bases? With ESG considerations arguably rubbing against fiduciary duty in the time-honoured sense, even the seemingly simple matter of proving that an investment was appropriate in the first place is becoming vexed.
The wealth management industry has long had to wrestle with a paradox: while deeply personalised service lies at the heart of its value proposition, cost considerations – on both sides – must limit customisation to where it really counts. Mass customisation of portfolios facilitated by technology has long been acknowledged as the only workable path. But now, these customisations need to be factored in when considering the analysis of the consistency of outcomes and foreseeable risks under consumer duty. Whether it is a restriction on what can be bought, a restriction on what can be sold, or a desire to hold a proportion in cash, these are some of the myriads of reasons that a portfolio will perform outside its peer group. In understanding outcomes, these points must be considered.
Foreseeable harm in theory precedes outcomes, and this requires testing to evidence that a client’s portfolio is suitable. Not just in a high-level asset class check, but in terms of the assets bought and their contributions to overall risks taken. These risks naturally include market risk whether volatility or CVaR, but should go further into looking at illiquid, un-researched, high risk and concentrated positions. The first challenge is knowing that these exist in a portfolio, only when they are known can they be addressed, mitigated, or agreed with the client as acceptable.
The challenge is daunting: according to EY*, 87% of firms see a need to implement key technological change to meet it. The good news, however, is that offering the kinds of monitoring and evidencing capabilities firms need will really be nothing new to leading technology vendors. For our part, we feel there has been a great deal of prescience in how we have developed BITA Risk’s solutions over the years: Consumer Duty represents just a sort of cross-cutting complexity our products were designed to solve.

Beyond box-ticking

Canvassing the large and growing range of institutions which already rely on our products reveals a heartening degree of confidence in how they will cope with the new rules. Others who have perhaps held back on their investments are now feeling the April 2023 deadline bearing down. The industry is however showing itself eager to wring the maximum business benefits from this compliance challenge, as it should: rather than merely “ticking the box”, EY* has found that 60% of firms want to take a holistic, business-wide approach to the Consumer Duty rules.
What this already looks like at our client firms is very positive, with foreseeable harm monitoring, performance and yield outcome monitoring already deployed in many cases. This monitoring – with the attendant MI (management information) on trends and systemic issue identification – is backed up by a systematic approach to collecting reasons why a portfolio may be out of line, enabling management of the exceptions apart from consistency checks on the core.
Firms with our profiling solution are carrying out risk-profiling and suitability assessments at the level of individual financial goals, monitoring against clients’ capital and income requirements, and keeping a close watch on ongoing costs and charges at both the portfolio and asset level. As a result, many can already point to immaculate management information on any Consumer Duty metric the regulator might choose.
But, of course, for the best providers, all this is about so much more than fending off potential compliance concerns. They will want to be able to deeply interrogate their information to be absolutely sure that their clients are achieving optimal outcomes – and to be able to further improve their investment and advisory strategies wherever they can. From our experience, the message that duties can be readily transformed into differentiation opportunities is very much one firms want to hear.
We all know that upholding Consumer Duty will already be business as usual for any wealth manager worthy of the name; that the whole industry is now being asked to fully operationalise and evidence adherence to these principles should therefore be a welcome change – and particularly so for those organisations able to compete more vigorously on this basis. It certainly is for us.
As leaders in portfolio monitoring and governance, BITA Risk analyses circa £180 billion of wealth management assets every night for a range of Wealth management firms. At our core is the quick, efficient analysis and aggregation of data, with seamless and efficient workflows for governance and client managers alike. We have extended our solutions to deliver what firms need now for ESG, TCFD, and Consumer Duty together with the significant added benefit for the firm of identifying problems before they arise, reducing both compliance risk and the chance of poor client outcomes, meaning both parties can benefit from a forward-thinking approach.
If you would like to discuss any of the points raised here, please contact us at or see more information on our solution here.
In the next few weeks, we shall be sharing thoughts on the monitoring of CIPs as well as Risks and Suitability. Sign-up here to receive these updates directly.