Advisers who are struggling to produce concise and personalised suitability reports should take their questions to the Financial Ombudsman Service, says FCA technical specialist Rory Percival.
Speaking at a Distribution Technology conference in London yesterday, Percival again raised concerns that suitability letters are too focused on defending potential complaints and not enough on client engagement.
He said: “We often get thrown back at us the argument that advisers have to put in all the information they do because of the FOS.
“First of all, I don’t buy that. If suitability reports are personalised and clearly demonstrate why the recommendation is suitable for that individual client and is communicated in an effective way, I don’t see why that would have less chance of being upheld by the ombudsman.
“Secondly, I can’t speak for the ombudsman, but why don’t you ask them? They run a number of events around the country and have outreach managers who go to regional events.”
Responding to a question on whether the FCA and FOS would meet to discuss the issue and give the industry guidance, Percival replied: “Watch this space.”
An FCA spokesman clarified that the FCA and FOS are not in talks on the issue, but will be speaking at a number of events with joint question and answer sessions over the coming year.
A FOS spokeswoman says: “We understand that advisers genuinely want to do the very best for their customers – and when this is reflected in the advice given and relevant regulations are followed, there’s no need for advisers to be concerned.”
Percival also highlighted advisers’ assessment of clients’ experience and knowledge of investments as a potential area of concern for the regulator in risk profiling.
He said: “There is the client’s attitude to risk and capacity for loss, but the often forgotten third element of the risk profiling process is the client’s knowledge and experience of investments.
“On some occasions we see experience and knowledge has not been looked at all, and in some cases it has not been looked at sufficiently.
“Where it has been asked about, in some cases that has not been taken into account in the recommendations made and the way the recommendations are communicated to the client. The classic example of that is where you have a client with little investment experience and the suitability letter is full of jargon.”