Clients and Friends,
Opting Up isn’t Optional
In June, we reported on the FCA’s Review of Smaller Asset Management Firms and recommended a review of your firm’s process when opting up clients to elective professional status. That review should identify if the process is sufficiently robust and if your firm captures the information that would demonstrate, on a stand-alone basis, to the regulator that you have only opted-up clients that should genuinely be treated as professional clients.
So what?
We know the FCA are catching up with asset managers they didn’t include in the first round; we know that opting up is on their radar (it is entirely consistent with their protecting retail investor remit) following that initial review; and we also know that failing to opt up ‘properly’ can bring you right back into Consumer Duty failures, which you have probably concluded don’t apply.
What now?
Review that opt-up policy and how it works (or doesn’t) in practice and the supporting documentation you collate. Ensure that the documentation is stored and is complete. Risk assess those that you are seeking to opt up and ask yourself, given all the circumstances, can we truly justify a professional categorisation? Family, friends and some employees are always a grey area to look closely at, telling the regulator, “that’s my mega rich friend from real estate, so he’s fine” or “she’s been investing in hedge funds for years, no problem” or “they have worked here for years so of course they know the product” isn’t sufficient in isolation.
If you would prefer some independence to your review, then Judd of course can be engaged to kick the tyres. To get you started if you need a opt-up form to refresh your records then please contact us at judd@juddadvisory.com and we are happy to share that with you at no cost.
Remember, a robust opting up process, has never been optional.
