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How to cut down on suitability reports

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I sent out a paper copy of a suitability report to a client yesterday. It was 142 pages long in total. Of this, 121 pages were appendices, which included:

  • Illustrations and key features documents for three protection plans
  • Illustrations, terms and conditions, fund factsheets and KIIDs for two Isas, with two multi-asset funds
  • Risk tolerance information

Excluding the front cover and contents page, the meat of the report was contained in just 18 pages. It was in colour with supporting charts and tables. It was a work of art. But even printed double-sided it will probably give the postman a hernia. I just hope the clients read it.

Our clients place an incredible amount of trust in us. I think we underestimate how big a deal it is for someone to walk into our office for the first time and spill their financial guts to us. In return, we want to send them away with their needs met and their plans on track. We want to begin a relationship with them where we can serve them for years.

Yet, at outset, we give them 142 pages to read. If I were receiving one of these documents, I would wonder what the adviser was burying in the appendices. The whole thing looks like a cover-your-backside exercise, which I suppose it is. I imagine that if I had insisted my wife digest 142 pages of small print before I agreed to marry her, I would still be single now. There must be a better way.

I have long since given up trying to write up the cashflow modelling part of the planning process. Now I create a précis video, lasting about 10 minutes, that summarises the Voyant planning conversation. Clients love this, as it does not take long to watch and they are easily reminded of the reasons we made the decisions we did.

I briefly tried replacing the full suitability report with a PowerPoint presentation with a voiceover from me. This worked similarly to the Voyant video but covered the risk tolerance stuff, risk warnings, charges and so on. It was OK but still did not really satisfy my desire to make sure people had everything they needed to know in an easily digestible form.

I wonder if the answer is regulation of products rather than advice? If the only products available were those sanctioned by the FCA, the advice process would be a breeze. Advisers know clients do not really care much about what products they get, as long as their long-term needs are met. For the financial planner, the end product is merely a tool to use to help our clients achieve their stated aims, rather than the whole point of the advice process.

Perhaps a stakeholder-type suite of products, signed-off by our glorious regulator and given some kind of mark of acceptability, will close the advice gap. I cannot say I am hopeful of that ever happening – not least because presumably the regulator would then be liable if the products failed to meet up to expectations.

I wish I knew what the answer might be. Perhaps those wishing to comment on this piece have an opinion. For now, I will continue to provide eight times the information the client actually needs to make a decision. And I will try to save a few trees by opting to deliver the report in PDF form.

Pete Matthew is managing director of Jacksons Wealth Management 

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. I agree Pete. I don’t know what the answer is. We deliver our reports prior to any advice being concluded and in that way, it becomes a discussion document. Keeping the Suitability Report relatively short by documenting objectives, recommendations, disadvantages and risks is one thing, but having to supply and explain KFDs, KIIDS and all other paperwork makes for a dull day.

  2. I, once, accidentally printed a suitability report on the office labeler, in a nano font. That was quite short.

  3. I agree with you too Pete. Like Peter, I don’t know what the solution would be to reducing all of this. The irony is that while it is incumbent on us to ensure that the client receives all of this, I would not be confident of it’s validity if it ever came to an arbitration situation – if someone from outside of industry were to view the 142 pages and conclude “how on earth is a person supposed to understand all of this?”

  4. I do know the answer and it is this (albeit unlikely to happen and it doesn’t even involve the FCA regulating “vanilla” products although that is an excellent idea). The FCA dictates 100% what needs to go into the SL to confirm the advice is suitable and further confirming to FOS that as long as the SL has the stated information in it, a consumer has no recourse for bad advice, because the adviser followed the regulations (literally to the letter).

    Alternatively get the FCA to have role-plays with advisers for a range of planning ideas. Sit with the adviser to construct what they would deem to be a suitable suitability report along with all the other required docs. I for one would be very interested to see exactly what they would come up with. Either of these would be a good start. The FCA know its a problem, we know its a problem, the clients hate the crap they get given but those responsible still do not do anything to actually solve the problem.

  5. Become a postman instead

  6. GrowingTiredOfAllThisBollox 6th December 2016 at 3:56 pm

    When you buy a new car, does it come with a detailed explanation on how the internal combustion engine works? No, of course not. It will come with a Handbook on the useful stuff like how to use the SatNav (but not on how GPS works). And if the customer really wants to know how the engine functions, or how the emissions are kept low (unless it’s a VW) then they can go away and find out. Likewise with the content of Key Features, KIID’s and all the other documents that you know damn well clients never read.

  7. The best way to shorten reports is to choose your clients more carefully.

    However there are also other ways. I sent out reports that were never longer than 10 pages at most. If necessary and in a green folder labelled Statistics and Key Features which was packaged separately and the clients knew that they could bin this immediately if they so wished. A red folder contained the pre-populated applications (if appropriate) clearly tagged and marked where they had to sign. A prepaid return envelope of sufficient size was enclosed. These were always copied when received back so that we had a solid record. This could then be sent to the provider together with any other necessary documents. (ID, IFA Cert, Trust forms, Proof of age etc.).This meant no backwards and forwards on the computer in the application stage. (This system seems to benefit the provider more than the adviser). The provider received everything in one go and we had a robust audit trail.

    Anyway I well recall having at least two conversations with the regulator along the following lines:

    “I have a client who invests £100k. I recommend (say) 20 funds. Each fund should have a Key Features/KIDDs document. I have to tick a box on the platform to say I have downloaded these. If I were to send it all to the client I would probably have to use parcel post. The stuff would come to over 50 pages. Do you really believe that the client reads it all? Do you really believe (and does the platform also believe) that we send out all this bumpf?”

    In both occasions the response from these luminaries at the Regulator was the same. A mute shrug of the shoulders.

    Far more apposite was what was contained in the report. A couple of lines on the finds explaining what they invested in.(A small selection to provide a ‘flavour’). For example a UK fund might have Shell, Astra Zeneca and BT for example. A global fund could have Nestle, BMW and Microsoft – this is what clients can engage with. Not the nonsense that if the moon is blue and there is an R in the month you could make some money. On the other hand if the moon is full you could lose some.

  8. If I go into a bank and ask for a personal loan of £10,000, provided I pass their credit score I can have the money in my account that very day. I’m now in debt and have less disposable income but I’m an adult and can take the the decision myself. But if I want to save a regular amount into an ISA or pension I have to tell the adviser my entire life story and end up with masses of paper. We make it easy to get Into debt but difficult to save. The problem is cultural. Our society believes everything must always be perfect, that nothing can ever go wrong and if it does someone must be to blame. I remember when Child Trust Funds were introduced and the FSA published a 100 page consultation document on how they should be dealt with by advisers and all for a “free gift” of £250. A complete loss of perspective

  9. “You need this life cover because by the time you have read this report you will have lost the will to live”.

  10. There’s nothing to stop KIIDs, KFDs etc to be sent by email! Or save in client portal.

  11. A good article Pete. It sounds like the vast majority of your 142 pages was product disclosure. There are a couple of problems with product disclosure. First, KFDs are also probably too long in some cases. A few years ago the FSA published some good and poor practice on KFDs and also concluded they were often too long. Second, and this is more problematic, they relate to each individual product/fund. Given the number of pages I assume you were recommending a portfolio of funds. In this situation there isn’t scope to have a portfolio level KFD without the individual KFDs (and KIIDs). The client is probably more interested in the portfolio and how that works and its risk level rather than the detail of the individual funds.

    PS I love the idea of the video

    • We did a video version of the IDD as a trial in about 2007.
      As someone else said, emailing non confidential docs like KFDs and KIIDs is not a problem. Surely the original idea of KEY anything was it was supposed to be key and a client only has time usually to read the key things.
      Our job is about helping clients to identify problems and then prioritize them after they have had that guidance and 142 pages without an order results in no reading.
      Like Harry splitting out and highlighting what is most important by colour coding and sue of mindmaps is an easy way for clients to grasp it and use of PDF and secure email or secure client websites has go to be the way forward.
      The PACE system came in for the Police in 1984 for goodness sake! Why is the FS industry in teh dark ages? it’s not because of advisers, it’s because of fear of the F-pack. (be afraid and shoot first comes to mind)
      I’ve never been one for ducking below the parapet…..
      We started recording telephone calls in 2003 and client meetings in 2007.
      We started doing audio suitability reports after checking with the then FSA that providing it is based on a logical agenda which covers all the points which would be in a paper suitability report, it would be more appropriate for a blind or illiterate client and discriminatory NOT to offer it as an option instead of a typed report to allc lients, especially as it is less costly to produce and actually more likely to be re-listened to than 142 pages read!
      Dictating and compiling a written suitability report can take a whole day bearing in mind it should be bespoke to the client, but if a simple agenda is prepared pre meeting covering all the points required in the meeting which would also be in any SR, then the client, the adviser or paraplanner can sit with their headset on whilst completing any documents needed and scanning any forms whilst putting against the agenda the exact time each mandatory compliance box was ticked for disclose purposes and yet…….
      The then FSA originally told me NOT to make it too widely known that they had actually accepted in writing my contention, but didnt’ want it widely know in case it was used as a short cut! (cutting out unread documents saves clients MONEY and enable us to service lower ticket value clients for goodness sake)
      I still have a copy of the response from Linda Woodall’s team and also from the FCA who i got to confirm it in writing too.

  12. How many people have clients that want to know anymore than what they could get back and how they could lose money?

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