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Leader: Can suitability review move advice forwards?

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

There are many strands feeding into the FCA’s review of advice suitability, and not all of them are to do with advice.

The National Audit Office has been scathing of the regulator’s inability to show how it is tackling misselling and, more broadly, how it is delivering value for money for the firms that pay its fees.

Interestingly, European regulators have also found the FCA wanting in terms of some its supervisory processes, with the European Securities and Markets Authority noting while the FCA is good at putting out guidance, it is not so good at following up where issues have been flagged.

So the suitability review may, at least in part, be looking to address some of these concerns.

Of course, the review first and foremost should be about checking whether advice is suitable. What good looks like, to paraphrase the FCA, would be an outcome that delivers meaningful best practice for advisers, as well as beginning to flush out the minority of rogue firms that should not be giving advice in the first place.

One hopes the final report will deliver a great deal more insight than the regulator’s anti-climatic due diligence paper.

The other aspect of all this is suitability reports, which are being assessed as part of the wider file review process.

The suitability report has long been a thorn in the side of both advisers and the FCA. The regulator first riled the advice profession in 2014 by telling them suitability letters were too long and too focused on defending potential complaints.

It further frustrated advisers last year by telling them to “ask the Financial Ombudsman Service” if they were struggling to compile clear reports.

When suitability reports are too dense to understand, it is not only the client that loses out, but the adviser too. Money Marketing has heard anecdotally of one client that was so confused by the contents of their suitability report they sought the advice of a rival firm to make sense of it.

If this review can go some way to help deliver simpler, more engaging suitability reports, with all the necessary reassurances for both adviser and client, it would mark one giant leap forward for the advice profession.

I know from speaking to a number of advice firms that some have already started to find a way forward on this important issue.

Natalie Holt is editor of Money Marketing. Follow her on Twitter: @Natalie_Holt_MM

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Report writing is an art, and very hard to master (for me personally) some people are better that others at that art.
    From a personal stand point my grasp of written English is not the best I may well be part dyslexic, but looking at the reports I wrote 20 yrs ago, too today they are poles apart and I am sure in the next 20 they will have moved on and got better, practice makes perfect if you will. Hell I think they get better each one I write !

    I have no issue with a SR being viewed as a stand alone document but one and one’s advice, should NOT be judged on that document alone, and it should NOT be a catalyst to enforcement by way of a s166.

    Which is why this latest FCA exercise may/will turn into a witch hunt, I may be wrong, but I doubt it.

    People need to accept, client files are getting bigger and bigger, the FCA want SR’s to get smaller and smaller if we are now asked not to put certain stuff in a SR to keep it punchier and easy to read then the whole file then becomes the SR not just a 5 or 8 page document !

    Further points, does a client ever read all the documentation you give them ? do they even read (most of the time) the SR ? Do they even want to ? the only people who really obsess over these is the regulator, FOS use them to determine a guilty verdict, and we just do our best, knowing full well they can save us or kill us, depending most of the time, by which way the wind is blowing !

    If the FCA or FOS look at the file as a whole……. are THEY suitably qualified enough to pass judgement ? any-one can read a letter or report no particular skill is required other that being able to read and this seems the basis of any decision; if one deems by a letter alone, that’s its unsuitable or they cant tell one way or another, well out comes the s166 from the back pocket to get a skilled person to look at the file as a whole, which as I know from personal experience very expensive, very stressful and worrying I went to hell and back for nothing, as everything was deemed suitable, all this started from SR’s being read as the whole basis of advice, NOT a part of the file or process as a whole !

  2. The whole SL area is fascinating. If we consider that the entire profession has been focused on them for decades. The motivation to get them “right” is fantastic as they can assist in comprehension, defend claims and ensure there are clients getting what they expect. Unfortunately, the FCA seems unable/unwilling to show what good looks or prescribe key areas that must be included. Additionally, FOS, is seemingly ready to find against an IFA should there be some detail/caveat left out. There is a challenge to FOS and FCA to give details as to what needs to be included and even in what format to ensure that they think it satisfies what they want.

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