Paradigm acknowledge that whilst the strict annual review rule has been removed, in practice, advisory firms are likely to continue with their Fair Value Assessment and distribution arrangements review of the IDD products they distribute on an annual basis. This seems the simplest approach to administer under governance arrangements and will mean that the firm is committed to achieving good client outcomes in the manner previously established. If a firm did, however, perceive that in recommending higher risk business (for example a replacement Critical Illness policy) there was the potential for customer harm, it may of course carry out a review of a particular product more frequently than every 12 months. It is recommended that all firms that are involved in GI or pure protection business assess the frequency of their PROD reviews. Intermediary firms may see insurers sharing updated information on the frequency of its product reviews. Firms should also ensure they have mechanisms in place to determine the frequency of review should they start distributing a new product, or how they will determine whether frequency needs to be revised should changes be made to a product they distribute. This should be conducted through the lens of whether there is a risk of customer harm arising from risk factors associated with the product. Firms are expected to monitor data to help inform the frequency of their reviews. Paradigm's view is that in practice, an adviser is likely to continue with their 15 hours as a base minimum level, so that they can provide evidence to the FCA and their professional body as required, that they are able to easily evidence that their skills, knowledge and competence are being kept up to date. Firms may however deem that it is appropriate to reduce the minimum requirement blanket approach and tailor the CPD activity of non-advising staff to the role they perform. Paradigm makes available a Training Needs Analysis document in the Training & Competence appendix chapter of the compliance manual, which provides suggestions of the types of CPD activity that may be appropriate for advisers and non-advising staff. Product monitoring and review Previously, advisory firms were required to conduct a review of their distribution arrangements in respect of IDD business on an annual basis. Manufacturer firms were also required to conduct reviews of their products within this same timeframe. Now, firms have the flexibility to determine the frequency of reviews. Each firm should make its own assessment on frequency, based on the potential for customer harm arising from risk factors associated with the product. This change aligns the requirements in PROD with similar requirements which came into force under the Consumer Duty. Continued on next page.... 13 SPRING PROTECT NEWSLETTER
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