‘Tempo: Ticking the boxes’  highlights what we are doing differently, all of which is explained in more detail in our full materials and presentations which we provide to professional advisers as part of our initial mutual due diligence process.

TEMPO: TICKING THE BOXES

We believe that best practice governance and compliance is: first and foremost, client-centric; second, best for the professional adviser firms which we work with; and third, best for us as a business, providing an opportunity for us to demonstrate best practice, raise the industry bar, and show how we think structured products can and should be done.

Of course, saying this is one thing: but demonstrating and evidencing that we mean it and that we do what we say is key … noting also that PROD (3.2.16 (2)) requires manufacturers to make ‘all appropriate information on our product approval process’  available to distributors.

We are proactive and transparent in providing details of our product governance process – and in explaining and discussing why we do what we do and how we do it.

Our product governance process comprehensively details how we conceive, design, develop, distribute and manage our products through their lifecycle.

Our product governance process includes various steps, groups and committees, which incorporate various inputs, checks, controls and sign-offs, in a consensus-driven decision making approach.

Each step / group / committee in our process operates with clearly documented terms of reference, detailing their: purpose and objectives; attendees; voting members / quorum; conduct; inputs and outputs.

We create and retain audit trails of our product governance process in practice, including the dates of and minutes from the group and committee meetings involved throughout our process.

The full terms of reference for each group / committee and the audit trails of our process in practice, including the dates of the group and committee meetings, can also be made available.

TEMPO PRODUCT GOVERNANCE OVERVIEW

Our professional adviser information packs (‘PAIPs’)  are designed to:

– explain how we meet our manufacturer product governance responsibilities under PROD (particularly PROD 3.2.16), providing distributors with specific information; and

– help professional advisers meet their distributor product governance responsibilities under PROD (particularly PROD 3.3.1), which states that distributors must:

i) understand the product they distribute to their clients;

ii) assess the compatibility of the product with the needs of the client to whom they distribute investment services, taking into account the identified target market of end clients; and

iii) ensure that the product is distributed only when this is in the best interests of their client.

Our PAIPS include details of our target market identification, scenario analysis (back-testing and forward-modelling) and value-for-money assessments – and the FinDatEx recommended European MiFID Template (‘EMT’), regarding target market, distribution strategy and cost information.

Examples of our professional adviser information packs (‘PAIPS’), for each of our plans, can be found below:

EXAMPLE - LKO1:
PROF ADV INFO pack ('PAIP')

EXAMPLE - LGKO:
PROF ADV INFO pack ('PAIP')

EXAMPLE - LIP1:
PROF ADV INFO pack ('PAIP')

Our product proposal packs (‘PPPs’)  are made available to professional advisers in order to:

– provide transparency with regard to our internal product governance processes behind our products; and

– support professional advisers in their product research and due diligence

Throughout the PPP numbers in [ ] (e.g. [3.2.1 (1)]) are references to PROD, providing context to help explain why we consider certain elements in our product governance process in order to:

i) meet our manufacturer product governance responsibilities under PROD; and

ii) help professional advisers meet their distributor product governance responsibilities under PROD.

Examples of our product proposal packs (‘PPP’), for each of our plans, can be found below:

EXAMPLE - LKO1:
PROD PROP PACK (‘PPP’)

EXAMPLE - LgKO:
PROD PROP PACK (‘PPP’)

EXAMPLE - Lip1:
PROD PROP PACK (‘PPP’)

We have worked exceptionally hard on our investor-facing plan documents, including our plan brochures. Our aim is to provide the best-in-sector plan literature.

We have had high level, multi-disciplinary regulatory and legal input from leading law firm Simmons & Simmons: and rigorous input and guidance from Plain English Campaign.

We are the first structured product firm – and one of the first investment firms of any type – to become a corporate member of Plain English Campaign and to have all of our investor-facing plan literature scrutinised and ‘crystal mark’  accredited by the Campaign to be jargon-free and using language which everyone should be able to understand.

The ‘crystal mark’  is Plain English Campaign’s seal of approval for the clarity of a document: it is the only internationally recognised mark of its kind.

We are still surprised that the number of financial services firms genuinely committing to using plain English is so small … for something which is so obviously and non-contentiously positive and part of ‘doing the right things – and doing simple well’. To our minds, it doesn’t get much simpler than using plain English!

In addition to the content and the plain English descriptions and explanations of features and risks, we have also given careful consideration to the design of our plan literature, including the pagination and layout, focusing on the readability and reader experience and engagement, to help ensure investor interest, engagement and understanding.

Examples of our plan brochures, for each of our plans, can be found below:

EXAMPLE - LKO:
plan brochure

EXAMPLE - LgKO:
plan brochure

EXAMPLE - Lip:
plan brochure

Our ‘if / then …’  summaries accompany our full plan brochures and provide simple, colour coded, single page summaries of the key contractual terms, conditions, risks and potential outcomes of our plans.

Examples of our ‘if / then … summaries’  for each of our plans, can – be found below:

Example-lko1:
'if / then ...' summary

Example-lgko:
'if / then ...' summary

Example-lip1:
'if / then ...' summary

We have worked hard with our lawyers and Plain English Campaign to ensure that our investor-facing plan brochures and ‘if / then …’  summaries explain our products using simple language, avoiding unnecessary jargon and aiming to provide explanations which everyone can understand.

We have also worked with Plain English Campaign to prepare crystal mark accredited suitability letter inputs, to assist professional advisers using our products.

The inputs are designed to help professional advisers construct suitability letters, with plain English wording to explain factual information, covering various sections which may be helpful within suitability letters, such as: what a structured product is; why investing in a structured product is being advised; the importance of portfolio diversification; the features and risks of our specific products; the importance of understanding the key risks, such as counterparty and stock market risk; as well as highlighting both the positive and negative target markets.

It is important to highlight that these inputs do not take account of the investment objectives, particular needs or financial situation of any client or potential client of any professional adviser, and the headings and layout should not be taken as a guide for how a suitability letter should look or what a suitability assessment and letter should include.

Professional advisers are responsible for ensuring that their suitability letters are current and appropriate for any client and comply with all applicable laws and regulations.

We have provided the inputs in word format, so that professional advisers can copy and paste and use and make changes easily and conveniently.

Examples of our suitability letter wording inputs, for each of our plans, can be found below:

Example - LKO1:
suitability letter input

Example - LgKO:
suitability letter input

Example - Lip1:
suitability letter input

We are an independent plan manager (not a bank issuing its own paper / products).

We think it’s straightforward – and important – to state the obvious: issuer / counterparty risk is the most fundamental risk of a structured product; both the potential returns of a structured product and the repayment of capital usually depend upon the financial stability of the issuer / counterparty throughout the investment term.

Professional advisers and investors should seek to identify structured products backed by strong issuers / counterparties.

We developed, maintain, publish and provide professional advisers with access to ‘TICS’  (the Tempo Issuer and Counterparty Scorecards).

TICS provides a bar-raising resource supporting professional adviser issuer / counterparty research. It is designed to provoke and support more detailed and objective consideration and understanding – including comparison – of issuer / counterparty financial strength / credit risk.

TICS covers all 30 global systemically important banks (‘G-SIBs’)  and a small number of domestic systemically important banks (‘D-SIBs’).

It compiles and provides access to multiple indicators of financial strength and credit risk that are widely recognised as pertinent to analysing, considering and understanding counterparty bank financial strength / credit risk, using a robust methodology, including a scoring system, across 5 individual ‘Category Scorecards’, covering 27 different ‘Factors’.

We publish TICS each month, producing 9 outputs for professional adviser use. Full details can be found via our website: https://tempo-sp.com/tics.

As part of TICS, we publish the ‘TICS: Side-by-Side View’, each month. The ‘TICS: Side-by-Side View’  provides the raw data used within TICS for the main UK retail structured product issuers / counterparties, displaying the data so that it can be looked at and assessed ‘side-by-side’.

You can access the ‘TICS Side-by-Side View’  via our website: https://tempo-sp.com/tics/side-by-side-view.

We also produce and publish ‘TICS: Reports’  for the main UK retail structured product issuers / counterparties, each month. The ‘TICS: Reports’  include both the raw data used within TICS and the TICS scoring that we attribute to each TICS Factor (highlighting the worst, best and average data point for each factor) and each TICS Category, for each issuer / counterparty.

You can access the ‘TICS: Reports’  for each issuer / counterparty via our website: https://tempo-sp.com/tics/reports

Module 4 of our Academy explains counterparty research, including credit ratings, credit default swaps (’CDS’)  and balance sheet fundamentals.

You can access module 4 via our website: https://tempo-sp.com/our-academy/our-professional-adviser-academy

Examples of our ‘TICS: Side-by-Side View’  and ‘TICS: Reports’  can be found below:

ACADEMY MODULE:
COUNTERPARTY RESEARCH

EXAMPLE:
AMALGAMATED SCORECARD

EXAMPLE:
CREDIT RATINGS

Example:
'tics: side-by-side view'

EXAMPLE - 'TICS: REPORT':
- BANK OF AMERICA

EXAMPLE - 'TICS: REPORT':
- BARCLAYS

EXAMPLE - 'TICS: REPORT':
- BNP PARIBAS

EXAMPLE - 'TICS: REPORT':
- CITI

EXAMPLE - 'TICS: REPORT':
- Credit Agricole

EXAMPLE - 'TICS: REPORT':
- CREDIT SUISSE

EXAMPLE - 'TICS: REPORT':
- GOLDMAN SACHS

EXAMPLE - 'TICS: REPORT':
- HSBC

EXAMPLE - 'TICS: REPORT':
- INVESTEC

EXAMPLE - 'TICS: REPORT':
- JP MORGAN

EXAMPLE - 'TICS: REPORT':
- MORGAN STANLEY

EXAMPLE - 'TICS: REPORT':
- MORGAN STANLEY INT PLC

EXAMPLE - 'TICS: REPORT':
- NATIXIS

EXAMPLE - 'TICS: REPORT':
- ROYAL BANK OF CANADA

EXAMPLE - 'TICS: REPORT':
- SANTANDER

EXAMPLE - 'TICS: REPORT':
- SOCIETE GENERALE

EXAMPLE - 'TICS: REPORT':
- UBS