"At the heart of the CFRs is a renewed commitment to align investment strategies to investor needs and their risk profile," said
Results from a Q2 Morningstar industry surveyi suggest there is some uncertainty that advisors and firms are prepared to adequately address this regulatory demand. Of a representative sample of 110 financial advisors, 64% shared that they are "on their own" without support from their head office to navigate the reasonable range of alternatives requirement. Yet 36% of respondents indicated they have "none" or "not much" understanding of the Client Focused Reforms. This could lead to a significant challenge for head office teams to ensure advisor readiness in time for the regulatory deadline. This lack of confidence is reflected in the responses from the 64 head office respondents as well. Only 39% in this group believed their firm to be prepared to help advisors "establish a simple, standard and auditable process to find a reasonable range of alternatives."
To that end, a solution that can situate the fundamental regulatory requirements into the daily operations of advisors, like the Morningstar Due Diligence Module, could bolster the confidence of both firm head offices and their advisors. "Firms that can easily operationalize CFR requirements will be more likely to create clear and lasting compliance processes that minimize the impact to their advisors," said
Key functions of the Morningstar Due Diligence Module include:
- Ability to filter a product shelf for a reasonable range of alternatives – Intuitive workflow for advisors to quickly narrow down, compare, and select from a firm's approved product shelf. The module helps in assessing recommendations against performance, risk, and fee data, in addition to integrating Morningstar's industry recognized proprietary ratings.
- Select suitable investments - The module establishes a firmwide standard process for advisors to demonstrate they have considered a reasonable range of alternatives when building investment proposals. The built-in audit trail helps show they have addressed key portions of suitability requirements.
The Due Diligence Module is an add on to Morningstar's existing research capabilities and can be enabled seamlessly for firms who license Morningstar Advisor WorkstationSM, as well as offered to wealth management firms and their advisors who do not currently license the product. The module supports mutual funds, exchange traded funds, and equity data, with additional investment types planned in subsequent releases.
"The Due Diligence module has been designed with the flexibility to enable firms to ensure their advisors can compare the investment attributes which are viewed as most important to investors and also support the suitability requirements of the Client Focused Reforms," said Moorhouse. "Morningstar has configured a solution for wealth management firms that incorporates the due diligence principles used in the creation of their product shelf while at the same time providing a workflow which has minimal impact on the day-to-day workload of their advisors."
For more information on the Due Diligence Module, please visit https://www.morningstar.com/try/client-focused-reforms.
About
©2021
MORN-P
i Information shared here is based on an industry survey conducted April-May, 2021 to Canadian financial advisors and head office professionals involved with Client Focused Reform compliance or operationalization. In total, 142 advisors, and 64 head office respondents completed some/all of the survey to give us a better picture of the industry's readiness for the upcoming regulatory changes. More information and insights can be found here.
Media Contact:
Scott Anderson, 416-420-9909, scott.anderson@morningstar.com
View original content to download multimedia:https://www.prnewswire.com/news-releases/morningstar-addresses-know-your-product-obligations-of-the-client-focused-reforms-with-the-launch-of-the-due-diligence-module-into-morningstar-advisor-workstation-301380967.html
SOURCE Morningstar, Inc.
© Canada Newswire, source