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 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.
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.