Many advisers tell me how much they know about their customers but you would never guess it from their files and suitability reports. Often standardised, these have no sense of following from the fact-find on file. This worsens when clients review their customers’ finances annually then try to do execution-only Isa transactions afterwards. They wonder why compliance people tell them they cannot do this because of the nature of their prior client relationship.
Let us take a step back. When the annual review comes up, the adviser needs to produce a document containing all the information, however tedious, they have about the client. This can be used at the first stage of the review to check the accuracy of the adviser’s knowledge and whether anything has changed. Attitude to risk information, for example, should be noted here.
The next document sets out recommendations for the clients’ finances for the coming year. If it contains personal recommendations it is a suitability report. It must explain why the advice is being given by reference
to information in the fact-find and the risks and disadvantages, including costs.
Zip the two documents together and send them to the client. When Isa season comes around or other advice is needed, the suitability report can refer extensively to the earlier report so long as a copy of that report is zipped to it. In fact, all three should be sent together in email form.
Now the adviser can see more clearly what areas of advice the client might appreciate at the time of each review. Second, the three-way suitability report is easily read since the client only reads the most recent part and is much more compliant than most. Finally, it makes it much easier to hand the client over to another adviser (for holidays, retirement or just staff development.)
Adam Samuel is an independent compliance consultant