PIMFA Journal Edition 26

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20. 27. UK SDR: FIX
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The year ahead is set to be another significant one for anyone interested in ESG. If 2023 was marked by the rise of ESG-scepticism in the US – a tide that never really landed on this side of the Atlantic – we are now set for the year of ESG scrutiny in 2024.

Regulations for EU financial market participants with similar disclosure requirements coming to the UK.

As ESG investment has become mainstream, the ability for investors to judge ESG credentials of investment targets has become even more important. While these new standards and rules will form an important part of ESG scrutiny in 2024 and combat greenwashing, in our experience it pays for investors to go further if they want to get a true feel for ESG credentials of funds on the market.

are run, to performance on social issues and environmental impacts. A first point of scrutiny for ESG investors should therefore be to peel away the ESG label and look at what ESG means for the fund or investment in question.

For the biggest businesses across Europe this will mean reporting against the EU’s CSRD, a framework which standardises the content and quality of sustainability information. In the UK a combination of new Advertising Standards Authority guidelines for companies promoting their sustainability credentials and the new rules in the UK Sustainability Disclosure Standards (SDS) will put the onus on companies to present detailed and evidenced climate disclosures. These come hot on the heels of the Sustainable Finance Disclosure


In the rush to secure money earmarked for ESG investment since 2020, a flurry of funds have marketed themselves with ESG labels. As of August 2023, Bloomberg estimated that ESG labelled funds hold around $7 trillion in assets.

While the headline figure is impressive, the reality is that an ESG label is unhelpfully broad in scope covering everything from how the companies

ESG integrated funds will give consideration to ESG factors in investment screening and decisionmaking. Thematic ESG funds will choose to follow specific trends such as renewable energy or sustainable agriculture. These can lead to quite different approaches to investment so in both instances, as well as myriad others, it’s important to understand the investment strategy: a fund which simply screens out certain investments or mirrors a wider market index is entirely different from one which is actively applying ESG principles. The real acid test for ESG credentials lies in the make-up of the investment portfolio. This means scrutiny should extend to checking which investments the ESG fund in question is making so you can be sure how accurate that ESG label really is.



One common measure of ESG performance comes from the ratings industry where the likes of MSCI and Bloomberg provide ESG scores for both funds and companies.

There is no doubt that independent ESG scores allow a quick and easy way for investors to compare investments. However, the breadth of schemes, lack of a universally agreed set of criteria for ESG ratings and range of methodologies means that investors should be wary about relying on a single ESG rating or ratings from unknown or obscure bodies.

An alternative or additional way of evaluating firms is to look at their commitment to ESG reporting beyond these industry ratings.

In 2024 the UK Sustainability Disclosure Requirements will help investors do this through fund labelling rules that will allow a market-wide mechanism for differentiating ESG credentials in three categories.

While full reporting is not expected until the end of the next year, firms who are serious about their ESG credentials will have already set targets for different ESG areas and report to existing standards such as UN PRI or TCFD. Even though different in scope, they might even have aligned themselves to EU’s SFDR standards.

This matters because firms who take a long-term and proactive approach to ESG disclosure are more than likely to have addressed the wider organisational changes which are key to successful ESG screening and investment and able to successfully adapt to changes in the future.


A third way of scrutinising a fund’s ESG credentials is to check for how it is approaching the emerging ESG themes which will have an impact on future investment performance.

Two themes to look for are biodiversity and human rights. Biodiversity is now seen as an essential partner to climate in addressing sustainability and is set to follow the same trajectory as climate when it comes to investment potential, risk and reporting through the new TNFD framework. The increasing demands for regulators and markets to report on human rights performance will also put this area in the spotlight with an increased emphasis on transparency and accountability from the firms we give our money to.


While these may seem like issues for tomorrow in an already-packed ESG landscape, they will have a future material impact on investment activity and fund performance and should be on the radar for future action today.


The final area of scrutiny for investors should focus on the ESG credentials of the institution or firm marketing ESG-aligned products. Here a number of simple checks can help.

The first of these is having a long term set of ESG goals for the organisation itself with clear targets and reporting. Second is checking that stewardship, engagement and advocacy activity for sustainable

investment and business practices goes beyond the bare minimum and shows proactivity in shaping the field and influencing policy.

Lastly, firms which are mature in their ESG integration will likely be more transparent about the steps they are taking to improve operational processes, people capability and risk management: they will share blogs and publish reports which talk about their progress.


There is no doubt that the new rules for ESG disclosure for funds and businesses arriving in 2024 will deliver greater transparency which allows investors to make better decisions. But even once they are in place, wider qualitative assessment of a

firm’s commitment to and maturity of approach to ESG investment will be just as important.





Given recent economic pressures, many individual savers might be forgiven for thinking that planning for retirement is less important. Such circumstances as the COVID-19 pandemic, the September 2022 UK “mini-budget” and general economic instability have demanded that they focus their savings on the here and now – making retirement feel like an increasingly distant prospect. Furthermore, pension providers have seen significant changes to how they operate, thanks to the introduction of Consumer Duty and current fair value guidelines. This makes it more complex for all parties, including financial advisers, to find suitable savings products.

Even so, it’s still possible to find high reliable returns on pension scheme members’ cash savings over the long term. So how can advisers help clients to find value for money in pensions, and protect their cash ahead of those well-earned years of rest?


The 2023 Autumn Statement confirmed that, contrary to some expectations, the government would raise the state pension by 8.5% from April 2024 – in accordance with the ‘triple lock’ policy. According to analysis by the Financial Times, this leaves the state pension over 10% higher than if it had simply been raised in line with inflation since 2010. Individuals who are planning for retirement therefore have a more reasonable and stable safety net, which in turn could make SIPPs and other personal pension schemes more attractive to a wider number of people.

Furthermore, pension providers are now bound by Consumer Duty principles, and will soon be required to apply them to their ‘closed book’

product portfolios as well. This obviously adds new layers of bureaucracy to their day-to-day activities – but it also shifts the role of a financial adviser in relation to pensions.

Historically, personal pensions have been seen as complex savings products, with simplification rules intended to de-mystify and usher in a new cohort of pension savers. The intermediary has played an important part; it has been the adviser’s role to determine which product was most suitable for their client. This remains the case, but under Consumer Duty, the provider must now identify a target consumer group for each of their products.

As the May 2023 ‘Dear CFO’ letter noted, “this is particularly important for a product like a SIPP, which can potentially have a wide target market due to the greater flexibility of investment choice available, but which typically comes with higher and/ or fixed administration fees (often alongside a range of other fixed transactional costs).”

This naturally brings the consumer and provider into closer direct contact. So how does this affect the role of today’s adviser?



All pension savers need to be confident that their scheme delivers value, regardless of where they’re invested

FCA statement,

November 2023

Following the pensions freedom legislation in 2015, pension savers have greater access to their pension funds – and many savers have taken advantage of these freedoms. In the first half of 2023, the FCA

reported that pensions and decumulation products saw the biggest rise in complaints of any area of financial services. Much of this rise in complaints can be attributed to non-workplace personal pension products such as SIPPs. Savers planning for retirement are therefore in more need of prior advice, in order to ensure fair value.

So how do advisers cater to increased demand while maintaining the quality of that advice? By optimising their own productivity. Advisers dedicate a lot of time and effort to evaluating various aspects of a client’s financial goals, including cash flow planning and investment returns. Therefore, under Consumer Duty, it’s crucial that advisers build a holistic understanding of the cash savings market in less time. Moreover, they need to ensure that they can

accurately update that understanding in real time, as new products are released.

One way to do this is to leverage an online cash management platform that collates providers, interest rates and other terms on one screen.

This saves advisers time on research during their working day, while helping them to convey fair value to their clients. In doing so, they can retain clients by ensuring optimised returns on their cash savings for retirement.



Ensuring eligibility for FSCS protection is usually a key priority for any saver looking to guard their pension. For those with a cash fund of more than £85,000, that means needing to diversify their funds between financial institutions. Advisers should therefore be looking for ways to do this efficiently – and they will undoubtedly be looking to protect cash from any banking wealth arm too.

Once again, a possible answer lies in online cash management: using a platform that enables advisers and their clients to deposit and oversee all their cash savings. In the past, this required numerous discussions with various pension schemes and subsequently logging in and out of various portals. Advisers now have the opportunity to unite these disparate cash deposits and manage them all on one screen. In 2024, diversifying funds doesn’t have to be logistically difficult.


The current UK economic climate does demand a significant financial commitment to the present day, but advisers can still guide clients on how to plan for the future. Moreover, solutions are emerging that can help advisers to efficiently encapsulate the savings market, make recommendations to their clients, and subsequently manage pension funds efficiently and accurately. By doing so, advisers can secure fair value products for their clients and retain them – while their clients optimise their cash returns, and can ultimately look forward to retirement.

Insignis Cash NBFI@insigniscash.com




Cyber attacks and data breaches are some of the biggest risks to the financial sector, yet they often go unacknowledged.


Financial services firms in the UK reported 640 cyber security breaches between June 2022 and 2023, which is more than three times the number recorded a year earlier.

Clearly, the sender of this missive has decided to prey on firms’ obligation to deal with the FCA in an open and cooperative manner.

When a firm is providing an ongoing service to clients, Consumer Duty obliges them to evidence that they are able to continue offering a reasonable level of support in the event of an issue arising with their services, which might include a cyber attack.

Likewise, the regulation’s cross-cutting rules mean firms must prevent foreseeable harm and a cyber incident is a potential catalyst for that. It could lead to the theft of personal data, a fraudulent transaction or even ransomware halting your ability to deliver ongoing services.

With Consumer Duty in mind, you need to start thinking about cyber security as part of your operational resilience. This includes recognising your responsibilities to consumers, recording the risks to data and closing any gaps that could lead to harm.

One such breach happened in February, when Succession Wealth became the victim of a cyber attack on its IT systems. In a statement at the time, the firm confirmed it had notified the appropriate authorities and that it was working to assess and resolve the situation and establish the nature of the attack.

Only last month, a firm contacted us to say it had been targeted by a phishing email purporting to be from the FCA. The recipient had noticed a spelling mistake and reached out to see if it was genuine. We confirmed it wasn’t and advised them to report the incident.

The email, which was marked as high priority, was entitled ‘FCA Disclosure’ and supposedly sent by the regulator’s supervision office. A PDF letter was attached for firms to download and complete. By doing so, the unsuspecting are then providing sensitive data to an unidentified source.

This email goes to show hackers aren’t just targeting big firms. Everyone within the sector is fair game and SMEs in particular can be seen as low hanging fruit, as they are thought to have less infrastructure and controls in place.





The FCA regards a material cyber incident as a regulatory breach under principle 11 of its Principles for Business. Having poor systems and controls in place to prevent attacks are also likely

to breach principle three, which requires a firm to take ‘reasonable care to organise and control its affairs responsibly and effectively with adequate risk management systems.’

A material incident is defined as:

A significant loss of data, or availability or control of the firm’s IT systems

Incidents that affect a large number of customers

To report a material incident, you must firstly contact your FCA supervisor, if you have one, or get in touch through the ‘contact us’ page, then follow the specific rules that apply to your business. If you are dual regulated, you must also inform the PRA.

Although it is not a legislative requirement, it is good practise to report a data breach to the ICO within 72 hours of the incident, unless you can demonstrate it is unlikely to result in a risk to

Incidents that result in unauthorised access to, or malicious software present on, your information and communication systems.

individuals’ rights and freedoms. You can do this online where feasible.

You may also need to inform the National Cyber Security Centre, which can help victims minimise harm. The organisation has some useful tools available to help you review your approach to cyber risks and ensure your technology, systems and information are protected appropriately. Its advice on managing an incident can be found here.

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To determine if your cyber security is resilient enough, firms need to ask themselves what they would do in the event of an attack.

The personal information you hold on clients is subject to the GDPR principles, which oblige you to ensure the confidentiality, integrity and availability of your systems and services. For example, have you pseudonymised or encrypted the data? Do you have appropriate measures in place to deal with risk and are they tested regularly to evaluate effectiveness? Can you restore access to the data in a timely manner?

It is essential you can answer yes to all of the above. To do this, start with a risk assessment to identify any potential weaknesses and how they may impact your ability to deliver good outcomes.

Next, create and test an incident response plan so

everyone knows what to do in the event of a cyber attack. Think about how you will support customers and how you might communicate with them during service outages.

Finally, review and enhance, where necessary, your data privacy and governance and strengthen your IT infrastructure. Don’t forget you remain responsible for any data that is outsourced, so ensure any other firms within your distribution chain or key dependents, with whom you share client information, have good IT resilience too.

The FCA has issued guidance on fake communications, which can be found here. If you are one of our clients, you can also find a Cyber Security Resources sheet in our document library.


Cyber attacks present one of the biggest risks to the financial sector and SMEs are particularly vulnerable. Start thinking about cyber security as part of your Consumer Duty obligations to prevent foreseeable harm by:

Carrying out a risk assessment

Creating an incident response plan Reviewing and enhancing your data privacy, governance and IT systems.

Director of Financial Compliance Specialists, B-Compliant info@b-compliant.co.uk

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At Dorsum, we recognise that innovation can be a driving force behind a wealth management firm’s success in acquiring and retaining clients. Let us take a look at some of the challenges firms face in these areas and how innovation can help overcome them.

demand for digital, personalised service and, of course, shifts in business processes and client servicing brought about by the pandemic. In this environment, traditional wealth managers need to step up their game in order to retain customers and attract new ones.

either with best-of-breed solutions – core-to-front office platforms and client-facing portals in Softwareas-a-Service implementation – or by outsourcing entire business processes.

The wealth management sector currently feels the effects of the fintechs and neobanks entering into the wealth management industry, incumbent banks stepping up their wealth game, an increasing

To adapt successfully, firms should start paying attention to new trends in the industry and incorporate them into their business processes as early as possible. Being among the first to take advantage of new technologies is key in an industry with a historic decline in margins and a complex, fragmented value chain.

Forward-thinking business development practices go hand-in-hand with agile work methodologies and state-of-the-art IT solutions. Firms find success

Adaptation is necessary, but with the quickly and constantly changing market, nowadays it is no longer enough. The key to keeping existing clients satisfied and grabbing the attention of prospects is to treat innovation as a constant, continuous element of operation rather than something that we must think about every now and then. The market leaders of the next decade will be the ones that learn to constantly evolve by embracing the latest technologies, products, and practices.



Client retention has always been one of the top priorities of wealth managers. The main pain points for which clients choose to leave have not really changed in decades. With the advent of digital transformation, however, there is a new dimension to think about when we asses these threats.

Based on market insights and conversations with wealth management firms, we have pinpointed three main factors that contribute to client departures and propose innovative tools to mitigate these issues.


of investors who switched providers in 2021 did so for a better digital experience, according to ThoughtLab’s report

Today, a client portal is a must for every wealth manager as trends already show that the main channel of engagement will heavily shift towards mobile apps in the near future. Clients simply want to be able to view their investment performance, contact their advisor or access their reports anywhere, anytime.

A 2019 YCharts investor survey reports that 63% of investors feel that more frequent and/or more personalised contact with their advisor would result in more confidence in their financial plan.

53% of wealth management clients are willing to pay more for a personalised service, according to the 2021 EY Global Wealth Research Report.

Advisor-facing software solutions with built-in Customer Relationship Management (CRM) functionality are straightforward and effective tools for improving client communication. More advanced applications have sophisticated notification systems allowing for all kinds of warnings for events such as big changes in portfolio valuation or tailored product recommendations.

Thankfully, the tools for personalisation have evolved together with client preferences. With digital tools that utilise AI, data analytics and automation, personalisation can be taken to the next level to create hyper-personalised services. Systems that have the ability to process advanced data will equip advisors with a complete view of a client’s financial and personal situation, allowing them to offer a truly marketdifferentiating, holistic service.



Today, when we are ready to make a purchase, our instinct is to search online. Whether it's a vacuum cleaner, shoes, or financial guidance, the internet is our first stop. For wealth management firms, having a strong online presence is just as vital as it is for fashion brands, if not more so.

A basic website and social media accounts are no longer adequate. We want prospects to find us easily on Google or Bing by improving our website’s organic appearance in search engines. This is where Search Engine Optimisation can work wonders.

For a wealth management firm’s website to be effective, however, it should be optimised for more than just search engines. To convert visitors into prospects, we want them to stay on the site, to get to know us and our services. To make the

most of each visit, the site should be well-designed and visually appealing, it should communicate our value proposition and USPs clearly and offer relevant, quality content. This could be news about us, insights on the market and educational content on investing.

Of course, client acquisition has its own complementary digital tools. One such tool had a massive impact when digital banks and investment apps stormed the market, and that is digital onboarding.

Digital or online onboarding tools offer a quick and convenient way for interested prospects to open an account without having to go into a physical branch, which was a major pain point even before the pandemic. Thanks to advanced technology, secure platforms can handle the exchange of sensitive information, and the onboarding process can be streamlined by using digital tools to automate data

collection, verification, and processing. This can save time and resources for both the client and the firm, as well as reduce the risk of errors and delays. Incumbents are now starting to realise that digital onboarding is the next big innovation in digital client acquisition. Most firms, however, have yet to take action, as ThoughtLab reports that 45% of wealth management leaders think that digital onboarding is the biggest area for front-office improvement. At Dorsum, we think that they should, as digital onboarding could become the norm in just a few years.

GYÖRGY SOMOGYI, Deputy Business Development Director, Dorsum, Dorsum, gyorgy.somogyi@dorsum.eu

ESZTER CSATLÓS, Junior Consultant, Dorsum, eszter.csatlos@dorsum.eu

STELIOS IOANNOU, Consultant, Dorsum

References Wealth and asset management 4.0. (2022) ThoughtLab. How Can Advisors Better Communicate With Clients?. (2019) YCharts. 2021 EY Global Wealth Research Report. (2021). EY.





The transaction reporting industry needs solutions for transforming and enriching raw system data, checking them for accuracy and completeness, and submitting them to the endpoint of choice. Control Now’s product suite is designed to deliver that holistically or on a modular basis with technology through two ‘family’ types. TR Assurance has TR Accuracy and TR Completeness, which assures data accuracy and provides technical reconciliation. With TR Direct, TR Transformation transforms raw system data into the requisite format and TR Connect delivers automated, direct reporting to the end point of choice. TR Accuracy was Control Now’s first product to market.


The data were extracted from our TR Accuracy records for 2019 to the middle of November 2023. Control Now records metadata for every run of this solution. The data include statistics on the number of records processed and a summary of validation errors. In addition, they record the reporting firm’s asset class. For the purposes of this report, the sector ‘asset management’ includes all firms that are registered AIFM & UCITS managers and the funds they manage. Wealth Managers are also included.

This is all aggregated information and does not reveal any firm’s individual position.

This document compares MiFIR results, highlighting the trends in transaction reporting for all sectors with an extract for asset management firms, which accounted for c 20% of the overall sample by number. It includes data on the number of runs, verified records, unsuccessful records, error rates, distinct LEIs (Legal Entity Identifiers), total errors and unique error codes.




The analysis has identified several critical trends and errors in transaction reporting, full details of which are included in the Appendix (page 41,42).

RUNS VALIDATED RECORDS FAILED RECORDS % ERRORS DISTINCT LEIS NUMBER OF ERRORS DISTINCT ERROR CODES 2019 103 9091399 3799167 42% 20 6711916 2278 2020 371 60296653 15667353 26% 70 37440419 7306 2021 827 180826757 65949192 36% 66 134742529 11382 2022 1523 259911126 70247659 27% 61 124043832 34785 2023 1022 101788444 6273122 6% 67 13159075 7477 ALL SECTORS: MIFIR RUNS VALIDATED RECORDS FAILED RECORDS % ERRORS DISTINCT LEIS NUMBER OF ERRORS DISTINCT ERROR CODES 2019 50 1961943 1200266 61% 6 1880849 1135 2020 94 7205758 4555737 63% 21 11832244 2226 2021 283 21822931 9530037 44% 23 24427481 5392 2022 605 14087919 3797733 27% 20 8001086 4690 2023 409 8357005 1382360 17% 21 3440538 3037


A close analysis of the transaction reporting data sample reveals significant progress. In 2019, the error percentage in transaction reports was notably higher compared to the rates observed in 2023. The trend of errors for asset managers has decreased in part because the number of asset managers has remained steady. As such, the decrease is likely a result of the use of TR Accuracy. Our experience is that firms that do not have a tool like TR Accuracy will have a high number of errors in the first run. Encouragingly, this decline in error rates indicates the industry's growing proactivity in handling complex reporting requirements. Changes in MiFIR regulations demanded more detailed reporting, initially increasing error rates but later leading to better compliance and reporting practices and error rates falling.

Regarding asset managers, error rates have consistently been higher than for the all-sector population, which is an interesting consideration. Still, encouragingly, it also demonstrated the same downward trend. In 2023, asset managers conducted 409 runs with 8,357,005 verified records, which showed a material decrease in the error rate to 17% compared to 61% in 2019. It can also be seen that the number of distinct LEIs has grown as firms increase testing –and CN has onboarded more clients.

Looking at the errors per run and per LEI, the same downward trend can be observed.

INSIGHTS FROM THE DATA 80 70 60 50 40 30 20 10 0 2019 2020 2021 2022 2023 %
All Sectors Asset Managers 80 70 60 50 40 30 20 10 0 2019 2020 2021 2022 2023
All Sectors Asset Managers 200,000 150,000 100,000 50,000 0 All Sectors Asset Managers 2019 2020 2021 2022 2023 0 2,500,000 2,000,000 1,500,000 1,000,000 500,000 2019 2020 2021 2022 2023 All Sectors Asset Managers # ERRORS PER RUN # ERRORS PER LEI

The types of errors observed also provide valuable insights. The most common error was incorrect off-exchange execution trading date time. These errors decreased notably over the years. High-impact errors like mismatches in buyer identification codes were significant in the early years but also saw improvement in later years. Errors related to price currency matching decreased, while persistent errors like incorrect short-selling indicators remained challenging. This pattern suggests specific areas where the industry needs to focus its improvement efforts.


There are a number of clear takeaways that Asset Managers should find helpful.


The reduction in error percentages from 2019 to 2023 highlights the growing accuracy and efficiency in MiFIR transaction reporting among asset managers and the direct benefit of adopting this technology.

Identifying common and high-impact errors offers asset managers a clear, prioritised basis to improve their reporting practices.


The trends provide a benchmark for individual asset managers to compare their performance against industry standards and to adopt best practices.


The increasing accuracy over the years suggests that technological advancements and better datahandling practices are being adopted within the industry – and the Regulator’s intentions behind the MiFIR regulations are starting to bear fruit.

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25 PIMFA.CO.UK ASSET MANAGERS TRENDS ERROR ERROR REF IMPACT % OF AM 2020 % OF AM 2023 1 Most common error all time Trading date time (28) granularity for off exchange execution M16 Medium 24% 76% 2 Most common error 2023 Underlying (47/48) not identified - overreporting ("Instrument identification code" (41) listings are outside of trading dates) M106c Medium 0%* 81% 3 Most common high impact error 2023 Buyer identification code (7) and type do not match. M58 High 14% 24% 4 Most resolved error Price Currency (34) doesn't match Listed Currency M214 Medium 43% 5% 5 Most resolved high impact error Trading capacity (29) AOTC and Buyer = Executing Entity M192 High 57% 19% 6 Most growing error Seller decision maker fields (21-24) not blank - seller is not a client M41 Medium 28% 71% 7 Most growing high impact error Buyer decision maker code (12) not populated with Investment Manager M257 High 8% 19% 8 Most persistent issue Short selling indicator (62) not populated for executions with clients M35 Low 14% 29% *Validation turned on in 2022, where 35% of firms experienced this issue.

In 2023, 81% of firms who ran data in TR Accuracy reported data with an underlying not listed in the trading venue on trading date.

The most common high impact error of 2023 was reporting the incorrect identifier for natural persons. The FCA explicitly warn firms to check this (Market Watch 70) https://www.fca.org. uk/publications/newsletters/marketwatch-70 venue on the trading date.

Over 35% of Control Now users have reduced incorrect reporting of price information by comparing their reports to data sourced directly from exchanges (M214).

19% of reporting firms reported themselves as buyer when execution capacity was AOTC (M192). The FCA are explicitly speaking to firms about this issue (See MW 59). https://www.fca.org.uk/publication/ newsletters/market-watch-59.pdf.

71% of AMs in the sample reported a seller decision maker when should not, because the seller was a client, up from 28% in 2020.



The importance of implementing effective ESG oversight systems





Following the publication of the FCA’s long awaited PS23/16 “Sustainable Disclosure Requirements (SDR) and investment labels” on 28 November, UK-authorised investment firms are facing a paradigm shift in regulatory compliance and reporting when it comes to sustainable finance. In the face of these changes, it is imperative that asset and wealth managers start to plan for, and implement, strategic technological solutions for the new regulatory landscape as opposed to short-term tactical fixes.

The FCA’s policy statement introduces a comprehensive approach to the sustainable investment market reflecting the growing consumer interest in ‘doing good while earning returns’ whilst also aiming to maintain the UK’s leadership in the investment world. This goal is supported by a set of measures including strict antigreenwashing rules, an innovative labelling system, and detailed product-level and entity-level disclosure requirements. Each of these measures is designed to enhance trust and transparency in sustainable investments and, importantly, is required to be backed by robust, evidence based KPIs and concrete, empirical data and to be independently assessed.

Time is of the essence when it comes to preparing for these changes as the new rules will begin to come into force in less than 5 months’ time with the introduction of the anti-greenwashing rules on 31 May this year and the new labelling regime beginning on 31 July. Furthermore, it is widely expected that all overseas domiciled funds marketed to UK investors will be included into the regulations once the consultation period on the FCA’s Overseas Funds Regime has been completed. The direct impact on advisory firms, and

how the new rules can support their advisory role, will be decided following consultation between industry and the FCA, but the new labelling and anti-greenwashing rules will give some certainty to advisors in ensuring that the sustainability claims made by and on behalf of investment funds are fair, clear and not misleading.

Adapting to these regulatory changes calls for a critical reassessment of internal systems within investment firms. The focus should be on developing solutions that are scalable and capable of handling the intricacies of ongoing ESG monitoring and reporting. Such systems are essential for tracking, analysing, and validating data to support KPIs and ensuring compliance with dynamic regulatory standards. While adhering to regulatory standards is the immediate priority, the ultimate aim should be to integrate sustainability deeply into investment strategies. The FCA’s progressive outlook, including plans to expand and refine the regulatory framework, suggests that ESG considerations will increasingly shape the investment landscape. Investment institutions should therefore view these system upgrades as an opportunity to be pioneers in sustainable finance, beyond mere compliance.



Whilst investment management firms have understandably been the focus of attention when it comes to ESG adherence, the responsibility to ensure adherence to sustainable investment mandates spreads to a much wider group of stakeholders. ManCos, depositary service providers and fund administrators play various supporting roles in this respect, and their diverse roles can result in an even more fragmented approach.

Each of these stakeholders, operating within their own sphere, may have a different interpretation of ESG standards and compliance requirements. This lack of uniformity can result in gaps and overlaps in ESG oversight, creating a fertile ground for inadvertent mandate breaches. In many instances, ESG compliance is monitored through manual and episodic checks, largely relying on attestations from the asset managers themselves as opposed to a third-party view. However, this approach will increasingly prove inadequate in the face of heightened regulatory scrutiny and the size and complexity of modern investment structures.


The solution to these challenges could lie in creating a unified ‘Book of Record,’ a central repository of ESG-related information and compliance records. This tool would serve as a single source of truth for all stakeholders

involved in the investment process, ensuring that everyone, from investment managers to auditors to regulatory bodies, has access to the same information. This unified approach would facilitate more consistent and transparent reporting and compliance monitoring, reducing the risk of misinterpretation and inadvertent non-compliance.

A Book of Record could standardise the metrics and methodologies used in ESG reporting, enabling a more straightforward comparison and evaluation of ESG performance across different investments. It could also streamline the process of regulatory reporting and compliance checks, as regulators would have access to a comprehensive and uniform set of data. Furthermore, this tool could enhance investor confidence, as they would have clear insights into how well their ESG criteria are being met.

Such a solution should enable continuous, automated, granular ESG oversight of an institution’s investment by enabling users to build, apply, monitor, report and record investment adherence to bespoke ESG rules based on any metric within their data provider’s dataset. The resulting ESG Book of Record would enable all stakeholders to confirm mandate adherence and quickly and accurately alert them to any potential issues.

PIMFA has partnered with KnowYourFunds to offer member firms such an ESG oversight solution.



The FCA's PS23/16 fires the starting gun on a transformative time in the UK investment sector, indicative of a broader shift towards sustainability. For investment firms and third-party fund service providers alike, this is an opportunity to develop robust, datadriven systems that not only meet current regulatory standards but are also flexible enough to adapt to future changes. By doing so, they position themselves not just as compliant entities but as leading figures in the realm of sustainable finance, ready to navigate the dynamic and evolving demands of the financial world.

SIMON PREST, Co-Founder, Knowyourfunds, simon.prest@knowyourfunds.com





Coaching, guidance, personalised guidance, simplified advice, investment advice, holistic advice. All terms associated with counselling individuals around their financial arrangements to improve their monetary welfare. Professionals capable of providing such counsel can be forgiven for finding the boundaries blurry and regulatory responsibilities unclear. The FCA’s upcoming review of the advice and guidance boundary is therefore welcomed; however, regulatory clarity will only partially tackle the issue. The true challenge is not necessarily supply-based, but one of engagement and education.

existing brand awareness), they’re typically rolled out to 100-200 friends and family, at a considerable discount, and no one signs up. The natural conclusion is therefore that the initial challenge is not technical or supply-based, but attitudinal in nature. The first barrier to seeing advice and guidance in the hands of a broader audience, is to approach that audience in a way which compels them to engage with their financial future.

To inspire mass behavioural change, any advice or guidance must be, to some extent, personal. It must recognise context. You can design the most beautiful retirement budget calculator or cashflow planner on the market, with all the latest behavioural design principles adhered to, but if it doesn’t speak to an individual’s circumstance, then it’s essentially useless. Context and actionability are crucial to improving engagement and inspiring change.

The often touted “advice gap” – the cohort unable to be served by a traditional advice model due to commercial constraints – implies a mass of confused individuals desperately crying out for help but having their cries falling on deaf ears, as traditional advice firms continue to engage high-net-worth families, typically towards retirement age. In my experience this simply isn’t the case. I’ve worked on a range of digital and automated advice projects which have resulted in eloquent, efficient advice processes, capable of servicing some reasonably complex advice needs such as at- and inretirement journeys, delivered at an affordable cost. As these propositions are launched however, (often with significant marketing budget behind them, or notable

In 1965, a social psychologist called Howard Levanthal attempted to persuade a group of university students at Yale University to get a tetanus jab. He divided them up into several groups and gave each of them a seven-page booklet explaining the dangers of tetanus, the importance of inoculation, and the fact that the university was offering free tetanus jabs at the campus health centre. Each leaflet had a different tone and focus. Initially the experiment was intended to examine how the role of fear influenced behavioural change. Although the study found that the group given the fear-based literature was more likely to declare their intention to get the jab, a mere 3% of all participants were actually inoculated. The subjects had seemingly forgotten everything they had learnt about the dangers of tetanus, and the lessons they had been taught had not been applied.


More recently, the economist Malcolm Gladwell repeated the experiment, and found that with one simple change –the addition of a map of the campus, with the health centre circled, and the times at which the jabs were available – the vaccination rate increased to 28%. He reflected

What the tetanus intervention needed in order to tip, was not an avalanche of new or additional information. What it needed was a subtle but significant change in presentation. The difference that made a difference, was the students needed to know how to fit the tetanus jab into their lives. The addition of the map and the times when the shots were available shifted the booklet from an abstract lesson in medical risk to a practical and personal piece of medical advice.

The lesson from this unnecessarily lengthy example? Once advice (or guidance), becomes practical and personal, it becomes memorable and therefore, easier to apply.

So how do financial services organisations achieve this? In many respects, the tools already exist. Data analytics, enriched with accelerated emergence of AI capability, allow for existing information held on customers to inform on logical next best actions. Think “your portfolio isn’t particularly diversified. Consider including funds from different industries or territories. A more diverse fund would help to spread risk across your portfolio”. We also see the emergence of techniques such as stream analytics – the intercepting of online behaviour during a journey – to

educate and provide reassurance. Think – “you’ve selected GIA, are you aware the ISA is a more tax efficient vehicle?”.

One step further, into an interoperable world where customer information can be shared amongst relevant parties, the opportunity to engage with relevant information in the context of a customer’s life events is becoming a reality. In a connected world of financial services, expected to be accelerated in part by the Government’s “data protection and digital information bill”, one can envisage a world where spending behaviours, combined with key demographic indicators, allow the sector to engage in a practical and personal way, at a time at which the advice or guidance is most relevant. Think of someone buying a pram and a cot, prompting information around life and critical illness cover, to ensure their new family is taken care of in the event of a disaster.

The opportunity to assist middle-income families who are managing their money poorly is significant and doesn’t require complex, regulated “advice”. Relatively simple steps, such as ensuring a sufficient cash buffer is kept in reserve, debts are prioritised, sufficient retirement provisions are arranged, and adequate protection needs are addressed can be easily implemented. The key to achieving the critical first engagement, from which all the sophisticated tooling and expert support can follow, however, is to ensure that any guidance or simple advice initiatives have the principles of practicality and personalisation at the core.





As the old saying goes, you wait ages for a bus and then two come along at once. No sooner has the industry implemented (or ‘substantively’ implemented) the Consumer Duty, arguably one of the largest pieces of regulatory change for 20 years, then another seismic piece of regulatory change raises its head. I’m referring of course to the FCA’s Environmental, Social and Governance (ESG) strategy, which affects most sectors within financial services, but its impact will be particularly acute for the Asset Management and Wealth sector.

Financial services has a crucial role in supporting the economy adapt to a more sustainable longterm future, and the resulting changes required of firms to ensure good customer outcomes in a sustainable environment are considerable.

Whilst the Consumer Duty and ESG have distinct elements, they also have significant synergies, lessons, and read across. Most importantly, they focus our attention, whether we are manufacturers or distributors of products, on meeting the needs and preferences of the end customer. We suggest that firms leverage actions and lessons from their Consumer Duty implementation programme as they develop and implement their ESG programme.


After much consultation, the ESG agenda is finding its way into new rules to provide common standards around clarity of investment labels so consumers know what they are buying. Those firms with over £50bn AUM (£25bn for

asset owners) were the first to undergo the Task Force on Climate-related Financial Disclosures (TCFD) reporting regime, with reports required to be published by 30th June 2023. Firms with less than £50bn but over £5bn AUM are second, and are required to publish their TCFD reports by 30th June 2024. In addition to this, the FCA’s recent Policy Statement PS23/16: Sustainability Disclosure Requirements (SDR) and investment labels, was published on the 28th November 2023, requiring the same firms to implement an anti-greenwashing rule, sustainability related product labels, and some amendments to specific naming and marketing requirements.

It is clear that, as a regulator with a consumer protection mandate, emphasising trust and transparency between firms and consumers is vital. It was a key driver behind the Consumer Duty, and it is also a key driver behind the SDR and investment labels regime. Financial products that are marketed as sustainable in some way need to deliver what they claim, and firms must have the evidence to back up those claims.



The ESG agenda includes a package of measures, and the proposed rules within the Policy Statement form a crucial cornerstone of the FCA’s ESG strategy.

The Policy Statement clearly outlines the FCA’s view on the relationship between good consumer outcomes and enabling consumers to make informed decisions


– As with the Consumer Duty, there are explicit references to cross cutting rules which set out how firms must act (proactively and reactively) to deliver good outcomes for customers. This means firms must:

• Act in good faith to deliver sustainability-related products and services, taking into account the expectations of retail customers.

• Avoid causing foreseeable harm, including harm caused through greenwashing, or a lack of consumer understanding; and

• Enable and support retail customers to pursue their financial objectives, including where customers have sustainability-related needs and preferences.


– Governance will play a critical role in shaping the success of any ESG programme. The recent report from The Sustainability Board in its 2023 Annual ESG Preparedness Report highlighted that, despite previous progress, there's been a stagnation in Director involvement in ESG issues. It is imperative that Boards and Senior Management are upskilled to ensure effective oversight of their ESG obligations and also establish appropriate reporting and assurance activity to ensure the ‘higher standards’ are being delivered.

about sustainable investing – 81% of whom would like the way their money is invested to do some good as well as provide a financial return.

With the consumer at the forefront of our minds, here are some key parallels between the Consumer Duty and ESG.

PEOPLE – Relevant staff will need to enhance their skills and competency so that they understand the firm’s ESG strategy and can explain a product’s ESG credentials. Remuneration structures will need to be reviewed to ensure they don’t create any conflicts or bias across the distribution of different products.

ENSURING CONSUMERS ARE INFORMED WITH INFORMATION THEY CAN RELY ON – It is vital that distributors understand the ESG profile of products so that they can relay information and disclosures effectively, educating the end customer and supporting their understanding. Recent ESG work from the FCA highlighted product inconsistencies and confusing language in firms. Firms will need to be content that any disclosures made are accurate.

2. 3. 4.


We learnt from Consumer Duty that the time needed to implement large scale regulatory change is often underestimated, and the strain on BAU is significant, so delay is not recommended. A comprehensive programme of activity is required, inclusive of robust governance and programme management disciplines. BELOW WE OUTLINE TWELVE CRITICAL STEPS TO EFFECTIVELY DEVELOP AND DELIVER YOUR PROGRAMME:

Assess the regulatory scope and impact 1.

2. 3.


Engage with key stakeholders Determine your firm’s ESG strategy and objectives Set up a dedicated change programme Set up the appropriate governance



Identify gaps and enhancements

Define your sustainability outcomes



Assess the data and MI you will need


Assign Executive accountabilities and responsibilities


Identify SME resource for delivery


Determine how you will disclose information and support customers


Assess what technology you may need



Whilst we have all known ESG regulations would be broadening, the FCA has clearly indicated there is more work to be done. In particular, as with Consumer Duty, we all need to think hard about consumer outcomes. We believe that firms can leverage their work and the mindset shift created under Consumer Duty and, in a similar vein, ESG adoption should be thought of as an evolution rather than a revolution of business practices.

It is another step in the direction towards the future shape of financial services that the UK government and regulators are striving towards. The regulator expects to see a material culture shift towards a focus on the consumer through the implementation of both the Consumer Duty and ESG rules.

Engraining ESG into your business practices means that good customer outcomes will support good sustainability outcomes. Whilst the proposed implementation timeline for the SDR should be manageable, it requires critical changes to be embedded within firms, with some key challenges expected. This will be a material change to firm business models, so focus will be a key to success.




On the 1st July 2014, compliance officers at Foreign Financial Institutions (FFIs) all over the world took a deep breath and braced for impact. (For those of you who don’t usually work with US regulations, ‘Foreign’ is the label given to Persons and Entities that are non-US.) FATCA went live in the UK and changed our Ops Tax teams forever.

Imagine my dismay when 2023 began with an Internal Revenue Service (IRS) notice about FATCA that essentially states FFIs are not doing a good enough job.

Amongst other things, Notice 2023-11, Foreign Financial Institution Temporary U.S. Taxpayer Identification Number Relief1 mandates the use of a series of reason codes that must be used in FATCA reports where the US Taxpayer Identification Number (TIN) is missing, instead of the standard dummy entry of nine 0s or As. The suggestion being enough time has passed to get our pre-existing accounts (those opened on or before 30th June 2014) due diligence up to date, and had it been done correctly, we wouldn’t have any missing TINs now.

to US Persons, TINs in particular. It feels a bit like the IRS haven’t considered the impact of their own, quite far-reaching requirements.

As we approach the 10th anniversary of that historic event, I find myself reflecting across the years on implementation, process change and improvement, mistakes and challenges, highs and lows, and my own personal contribution and efforts towards making this regime a success.

Whilst I can’t speak for every FATCA Reporting Officer outside of the US, I do work with a lot of different types and sizes of FFI, and I am yet to encounter anyone that could be accused of purposeful noncompliance, quite the opposite in fact. I could not count the number of hours spent on projects to identify, collect and validate the information relating

With much stricter indicia rules than the Common Reporting Standard (CRS), and the default reportability of certain accounts, the number of account holders queried for FATCA must be far higher than the number of account holders with a genuine US tax liability. And whilst those queries remain unresolved, we must report those accounts. For those ‘Accidental Americans’ (persons born in the US, but subsequently haven’t lived or worked there), and for those with incidental Indicia (eg a US telephone number that is actually a global routing number), there may never be a US TIN to provide, but the FATCA rules state we must report them until this is fully established. We can’t force customers to give us their TIN…a fact that has been pointed out to the IRS on several occasions.


As you can tell, it was niggling at me quite a lot. How many missing TINs are we talking about here? It didn’t take me long to find out why the IRS were telling us off. I found a report from TIGTA (Treasury Inspector General for Tax Administration – oversight office for the IRS) from April 2022, “Additional Actions Are Needed to Address Non-Filing and Non-Reporting Compliance Under the Foreign Account Tax Compliance Act”2 complaining that FATCA is not the success it should have been by now. The IRS throws blame towards the volume of missing TINs from FATCA reports, which prevents them from matching the report to a US taxpayer in their system.

Statistics within this report (averaging the years 20162019) show that only 44% of FATCA reports have a valid TIN attached, 7% have a blank TIN and 48% have an invalid TIN (These figures are straight from the report and must have been rounded as they only equal 99%). One can only assume that the dummy 0 or A entries are being included in the ‘invalid TIN’ numbers, as the xml reporting schema does not allow for a US TIN field to be left blank. But it does leave an unclear situation on how many of those invalid TINs are ones that have been presented to FIs on a W-9 or Self-Cert and have turned out to be invalid. For those scenarios, FFIs have met their due diligence responsibilities, and if a 9 digit number has been offered, identifying it as an invalid TIN isn’t always easy unless it’s 123456789. I am still without an exact answer to my question, but “quite a few” missing TINs seems to be the case.

So, why ‘reason codes’? These will allow the IRS to see, at a glance, the due diligence situation for each account missing a TIN. They are defining if the account is new or pre-existing, held by an entity or an individual, and what type of Indicia or Self-Cert situation has arisen for inclusion on the report. FFIs reporting outside the UK may have already used

these codes for reports submitted in 2023, but HMRC only mandates the requirements for reports submitted from 2024 onwards. For some firms, it is no small task to assess all their FATCA reportable accounts without a TIN and assign the appropriate code. System updates are required so that codes can be stored on account records, new fields and validation rules to be designed.

If you have in-house reporting technology, consider how that code is transposed without changing the account record to look like it now has a TIN. If you use a managed service for reporting, how are you going to track and compare the use of these codes year on year? Plenty to think about, and plenty to do.

If my experience reflects the full FFI population, it is hoped that the use of these reason codes will help the IRS to understand that the reports with no TIN are there because we are doing what they have asked. And with any luck, they may reconsider the approach to due diligence, especially for pre-existing accounts.

Change is in the air with the US now. Choosing to do their own thing with FATCA, they have recently committed to joining the OECD model for the upcoming Crypto-Asset Reporting Framework, a new regime they will participate in rather than imposing something different. A change in FATCA rules may be considered wishful thinking… I guess we just need to keep validating those TINs and watching this space.


https://www.irs.gov/pub/irs-drop/n-23-11.pdf 2 https://www.tigta.gov/sites/default/files/reports/2022-06/202230019fr.pdf

Alongside updates from PIMFA, the Journal includes several useful inputs from our associate member firms. These articles are an excellent opportunity to gain interesting insights into the wider industry and to learn more about PIMFA associate members. If you are an associate member and you are interested in contributing to future editions of the Journal then please contact:




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PIMFA Women’s Symposium

Event Date: 16 & 17 April 2024

Venue: Radisson RED Heathrow PIMFA is delighted to announce the launch of the first Women’s Symposium.

Build relationships with this community: host a personal development or investment and relatedfocused workshop Create awareness of your organisation: consider the many opportunities for networking, marketing and corporate branding at the event

Align your firm with thought-leadership, introduce dynamic, topical speakers and content that challenge thinking, raise awareness and encourage delegates to think outside the box.

We are currently putting together the agenda, and liaising with event sponsors – if you would like to get involved, or suggest a topic or concept to explore, please reach out – our friendly team will be happy to give you the latest. contact us at events@pimfa.co.uk to get in touch.

We look forward to hearing from you!

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