Take a look at the “your objectives” section of the last five suitability reports you prepared. Can you identify each client or do you struggle to tell them apart? If the former, then well done. If the latter, then you are not alone. Paraplanners and advisers can struggle in this area and fall short of FCA expectations for client objectives to be highly personalised.
It is also common to see examples where the stated objective is merely a summary of the adviser’s recommended solution rather than a statement of what the client hoped to achieve. The most effective suitability reports contain objectives that are specific to the individual.
Poor client objective examples include:
- “To save for retirement”
- “To invest for long-term capital growth”
- “To transfer your existing pension plan into drawdown”
So how do you get this right?
- Talk about what the client will do with the money, not just about the money itself.
- Flesh out the objective in terms of how much, when and why, as well as personal goals and any desired impact on the client’s family or business. For pension advice this might involve the expected date of retirement with reasons, required level of income, plans for the use of tax-free cash and so on.
- Repeat the client’s words where appropriate.
Setting clear, unambiguous objectives is critical in the provision of good advice. It also mitigates the risk of complaint arguably more than anything else and sets a firm foundation for the rest of the report to tell your story.
Phil Young is managing director of Threesixty