Distribution Governance Mutual Annual Reporting

DISTRIBUTION GOVERNANCE - MUTUAL ANNUAL REPORTING ('DG-MAR')

GOOD GOVERNANCE

We aim to ensure that good governance underpins all that we do. To our minds, good governance is more than just a regulatory requirement: instead, we believe that it is a core value to deliver good outcomes ... and we think many professional advisers share this view and want to be confident of good governance in the firms that they deal with.

As part of our distribution governance processes, as a condition of our Terms of Business ('ToB') with professional adviser firms, and to meet the requirements of the Principles for Businesses section of the FCA Handbook (which covers Consumer Duty and incorporates the Product Intervention and Product Governance Sourcebook ('PROD')), we must "take reasonable steps to ensure that the financial instrument [i.e. our plans] is distributed to the identified target market" (PROD 3.2.1(3)), we therefore ask professional adviser firms to complete a Distribution Governance - Distributor Due Diligence Questionnaire ('DG-DDDQ'), when they start using our plans.

In addition, and also under PROD, we are required to "regularly review our products" (PROD 3.2.19), and in doing so we should "collect ... information to detect patterns in distribution" (PROD 3.2.20).

Therefore, as part of our ongoing distribution governance, we also ask all professional adviser firms who have used our plans to complete our Distribution Governance - Mutual Annual Reporting ('DG-MAR') process. This facilitates us reporting to professional adviser firms, and professional adviser firms reporting to us, regarding ongoing product monitoring and target market / distributor governance, fulfilling our mutual obligations under PROD and our ToB.

As per our ToB with professional adviser firms, "You agree, on request from the Company, to use all reasonable endeavours to send the Company (except where to do so would result in the breach of any applicable law or regulation) information which the Company may require". Please only provide answers to the questions which do not result in the breach of any applicable law or regulation.

Please click here if you would like to understand more about why we ask the questions in our DG-MAR

Under PROD 3.2.19, "we must regularly review" our products, taking into account any event which could materially affect the potential risk to our identified target market, to assess whether:

(a) they remain consistent with the needs, characteristics and objectives of the identified target market;
(b) our distribution strategy remains appropriate;
(c) they are being distributed to the target market; and
(d) they are reaching clients for whose needs, characteristics and objectives they are not compatible.

PROD 3.2.24 also stipulates that "When a crucial event affecting the potential risk or return expectation of the financial instrument occurs, a manufacturer must take appropriate action, which may consist of the provision of any relevant information on the event and its consequences on the financial instrument to the clients or distributors of the financial instrument if the manufacturer does not offer or sell the financial instrument directly to the clients".

PROD 3.2.20 requires that we "Should collect and analyse appropriate management information to detect patterns in distribution as compared with the planned target market in order to assess the performance of the distribution channels through which a financial instrument is being distributed".

Under PROD 3.2.30, you are therefore required to provide us with relevant information and, under our ToB with you, you have agreed to use reasonable endeavours to provide us with this information.

SECTION 1: DISTRIBUTION GOVERNANCE - MUTUAL ANNUAL REPORTING:

PLEASE PROVIDE THE FOLLOWING DETAILS ABOUT YOURSELF AND YOUR FIRM.

1.1 Please provide your name, job title and contact details:

Name:*

Job title:*

Telephone:*

Email:*

1.2 Please provide the name of your firm:*

1.3 Please provide your firm's FCA FRN (Firm Reference Number):*

1.4 Is your firm an Appointed Representative?*

Yes
No

If 'yes', please provide the name of the Principal Firm:

SECTION 2: DISTRIBUTION GOVERNANCE - MUTUAL ANNUAL REPORTING:

TO HELP BOTH OF US MEET OUR OBLIGATIONS UNDER PROD, AND FOR US TO MEET OUR OBLIGATIONS UNDER OUR ToB, WE CONFIRM TO YOU:

2.1 As part of our consumer duty and product governance process, we have regularly reviewed our plans and a summary of the outcomes is available to Professional Advisers who have used our plans with their clients.

2.2 In summary, since our last review and over the period start of 2021 to December 2023:

(a) after the global economy exited Covid-19 lock down, the recovery in market was subsequently affected by the conflict Ukraine (Q1 2022), rising inflation and central banks around the world tightened rates rapidly. Currently, geo-politics and high rates continued to affect performance of stock and bond markets around the world;

(b) the recovery of the UK stock market in 2021 to 2022, driven by large sectors like energy and oil, caused a divergence in performance between the FTSE 100 index and the FTSE 100 Equal Weight Fixed Dividend index (FTSE 100 EWFD). While this divergence started narrowing over 2023, the FTSE 100 EWFD index remained lower than that at year end of 2020 (whereas the FTSE 100 index has remained largely unchanged over the same period);

(c) the performance of FTSE 100 EWFD index affected those structured product plans that started with strike dates in 2021 and 2022, with indicative secondary market price dropping. This reflected the fact that these plans may not have kick out triggered in first kick out date on the 3rd anniversary;

(d) despite the above, we have seen 38 plans kicked out or matured early. Most of them were kicked out at end of year 3, although there were 3 plans that kicked out at end of year 4. A delay in kick out does not mean the plans perform differently from the expected outcome when they were launched. Investors continue to receive a positive return when a kick out occurs, and often beating the performance of passive index funds over the same investment period;

(e) furthermore, our long income plans continue to pay out income every quarter. These plans have a memory feature. Where the plan remembers and any missed income payments can potentially be generated on a future quarterly income date;

(f) we concluded from the above points that no plans were performing differently to their known features and expected outcomes, in respect of market risk; issuer/ counterparty risk; or operational risk;

(g) we did not identify any plans which had become inconsistent with the needs, characteristics and objectives of our identified target markets;

(h) we did not identify any need for professional advisers (or end clients) to take any specific action in addition to their regular and ongoing review of the suitability of portfolios for individual client circumstances; and

(i) we are not aware of any breach by us of our ToB with you.

CLICK HERE To see our DG-MAR: Review-2023

CLICK HERE To see our FTSE 100 EWFD: Introduction and overview ppt

CLICK HERE To see our FTSE 100 EWFD: Introduction and overview video webinar

CLICK HERE To see Alpha's financial reports and accounts

CLICK HERE To see our product governance overview, which were updated following the implementation of consumer duty regulation at end of 2023

SECTION 3: DISTRIBUTION GOVERNANCE - MUTUAL ANNUAL REPORTING:

TO HELP BOTH OF US MEET OUR OBLIGATIONS UNDER PROD, WE WOULD LIKE TO ASK YOU TO CONFIRM THE FOLLOWING:

3.1 Were any of the investments into our plans made by or on behalf of clients of your firm outside our identified target market? We detail our target markets for our plans within the investor-facing plan documents for each plan and explain these further within the supporting materials which we produce for each of our plans for Professional Advisers, including our product proposal packs ('PPP's) and professional adviser information packs ('PAIP's).*

Yes
No