One in five advisers unsure of risk rules

One in five advisers is unaware of or wrong about their responsibilities over assessing clients’ risk appetite, according to Prudential research.

Early last year, the FSA issued a guidance paper on risk which stressed the need for advisers to be able to demonstrate how they have recorded a client’s capacity for loss, risk attitude and ongoing suitability for the investment decision recommended.

The research of 283 IFAs, carried out by NMG Research in October, shows 18 per cent of advisers are unaware of the guidance, with another 2 per cent incorrectly believing the paper does not apply to investments.

Bestinvest senior analyst Ben Seager-Scott says: “It is important to understand clients’ risk appetite and return expectation to ensure they are correlated.”