LET’S SHARPEN UP SUITABILITY REPORTS

Reading Time: 3 minutes

7 November 2022

Compliance professionals can be a cautious bunch. Sometimes, this leads to specified content making documents long and unwieldy and therefore, unlikely to be read by the intended recipient.

Take suitability reports. For the last five years or so the FCA has been pushing advisers to shorten and simplify their content. With the advent of Consumer Duty, this has become even more important, as the new legislation puts even greater emphasis on customer understanding and supporting outcomes.

So, if you haven’t done so already, add reviewing your suitability report template to your Consumer Duty implementation plan and let’s start producing documents customers actually want to read.

What does good look like?

Whilst the FCA prescribes what must be included in a suitability report, it is also highlighting the amount of superfluous content advisers tend to include. For example, information about the client garnered from your fact find. Let’s face it, most people know how old they are and how many kids they have…

When you’re writing a report, put yourself in the client’s shoes. Is it readable? Keep the information short and snappy, avoid repetition and add the additional blurb, such as provider detail and investment solutions, etc. in appendices.

The FCA is big on executive summaries. This is your opportunity to highlight the key points in the report – explain how and why your recommendations meet your client’s needs clearly and simply, drop the jargon and beware of the dreaded acronyms!

Think about the format of your report and how you can make it more accessible. Keep important information at the front and use headlines, colour, tables, graphs and bullet points to break up the text and highlight key risks and changes associated with your recommendations. No one wants to read long, rambling paragraphs, particularly if they replicate earlier work, such as the research process.

Personalise your report and include things the client said at your meeting to add relevance. Whilst a template gives you a starting point, it doesn’t have to be set in stone. We find religiously including standard paragraphs and general statements can lead to irrelevancy and repetition that will inevitably add length.

Be aware of what doesn’t need to be included. For example, information on status and scope of service would be better placed in your letter of engagement. There’s no need to dwell on the things you haven’t recommended (with the exception of stakeholder/workplace pensions) and it is also quite legitimate to refer the reader to information provided in previous/other documents, or held on your website.

As MiFID II made it a requirement to record all advice leading to transactions (either voice recordings or meeting notes), this can help evidence suitability, so shorter reports are possible, as they aren’t your only source of proof.

What should you include?

When reviewing your suitability report template, make sure it includes the following:

• A clear statement of the client’s goals and their priorities
• A short summary of their current situation, including any existing relevant investments
• Explain the reasons for your recommendations and how they address the client’s needs and objectives, highlighting the associated risks. Refer to the information upon which your recommendations are based
• Draw out the advantages and disadvantages of the recommended product to provide a well-balanced view and explain the implications of any ‘focused’ advice
• If an existing plan is being cancelled and a new one put in place, evidence the comparisons on a like-for-like basis. Set out clearly why the benefits of switching are greater than the costs involved
• Give a clear and concise explanation of costs, charges and potential penalties associated with your recommendations. This could be represented as a graph or table
• Clearly state the implications of your recommendations for your client’s tax liabilities
• Include a ‘further details’ section to insert specific client information. This is necessary to cover ‘other client’s characteristics.’

Key points

In a bid to practise what we preach, we have provided you with a brief summary of what you should think about when attempting to shorten your suitability reports.

Most importantly, focus on the client and the order of the information you want to impart – this will help shape the format. Personalise what you have to say, don’t repeat yourself and make use of appendices. They are your friend and the FCA’s!

For help or advice on how to review your suitability report template, don’t hesitate to contact us on (0161) 521 8641 or email: info@b-compliant.co.uk