Being able to point to an external third party to explain product recommendations is seen as an attractive way to minimise the adviser’s risks and the effort required to ensure client recommendations are based on the principles of ‘best advice’.

But did you know……

Relying heavily on the recommendations from a research house will not deflect compliance responsibilities away from the adviser. If the adviser is using research information as the principal basis for his/her recommendations then that adviser will in all probability be required to justify this reliance by proving that they have thoroughly researched the researcher.

So what questions need to be asked of a research house to satisfy the regulatory bodies that reliance on the research information will deliver the best advice to the client?

How about…..

• the research house truly independent and without bias? Are there financial connections to industry players that might influence this independence?
• is the competence of the researchers? What qualifications do they have to make judgements about very technical product differences? How do they find out what is important to advisers and clients in order to judge the merits of one product over another?
• research process is followed? Are the processes followed when comparing products and companies well documented, made publicly available and applied consistently?
• many competing companies willingly participate in the research? Does the research truly represent the market?
• the research recommendations robust or can they be easily manipulated to deliver different results in similar circumstances? Reliance on easily manipulated information will not offer any compliance protection.
• recent is the information provided? How long does it take for participating companies to get their information updated? Is this timing consistent across all participating companies or is there the potential for time bias towards selected companies?