View more on these topics

The key pitfalls to watch for on suitability

The FCA’s recent suitability review highlights an improvement in terms of client recommendations. But firms cannot afford to get complacent, with the results also showing that evidencing suitability remains an issue for many.

As well as ensuring a comprehensive audit trail and clear, jargon-free reports, other areas should be considered to ensure regulatory expectations are being met:

1. Replacement business and the use of CIPs

The main focus for the FCA is on customer outcomes. In instances where a centralised investment proposition has been used, or where a recommendation is reliant on a switch, it is important to clearly demonstrate how this arrangement is aligned to the clients’ specific needs and circumstances.

2. Over-reliance on risk-profiling tools

Many firms rely too heavily on risk-profiling tools. These tools alone are not enough to determine the appropriate level of risk. A robust attitude to risk assessment should also take into account personal circumstances, attitude to risk, knowledge and experience, as well as sense-checking the outputs of any tools used.

3. Order-taking versus advice

Clients are more likely to make financial decisions based on emotional drivers. This requires an understanding of such drivers and, where appropriate, challenging them to ensure positive outcomes.

4. Inadequate disclosure

Many firms fail to clearly disclose information relating to charges and attitude to risk, such as defining charges in sterling and percentage terms, and fully justifying key recommendations in a way the client is likely to understand.

Andy Sutherland is managing director, advisory services, at TCC

Recommended

UK-Currency-Money-Pound-GBP-620x430.jpg
4

Advisers in limbo over Govt delay to tax reforms

Advisers have criticised the Government’s decision to push back legislation that would introduce cuts to the money purchase annual allowance and tax-free dividend allowance for adding further uncertainty to client plans. Yesterday, the Government said it would remove the clauses in the Finance Bill that would introduce both measures, as well as a £500 tax […]

15

Has the Lifetime Isa failed to take off?

The Lifetime Isa has launched with little fanfare amid criticism the product will only serve the wealthy and disappointment at the lack of initial appetite among providers. The Lifetime Isa went live on 6 April, with those between 18 and 40 able to pay in up to £4,000 each tax year, with contributions qualifying for […]

FCA building FCA fees

Alliance Trust Savings tops FCA pension complaints list

Alliance Trust Savings has received the proportionally highest number of complaints among pensions companies, according to the latest FCA data. ATS had 21.6 complaints per 1,000 policies in force, according to the latest numbers for the second half of 2016. A total of 10 in every 1,000 client accounts at ATS complained about investments over the […]

Happy while you work

Well we’ve had scorching weather (yes even up here in Scotland!) and now the Euros 2016 are on – you can’t blame people for wishing life was just one big holiday.  With all these distractions it sometimes feels like work just gets in the way of having a good time! But sunny day skivers are […]

Navigating volatility

The making of any fund can be seen in how it responds to crises and opportunities. In this short video, Head of Multi Asset at Royal London Asset Management Trevor Greetham outlines how the Royal London Global Multi Asset Portfolios or GMAPs navigated through Brexit and the US election cycle. He also highlights the importance […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment