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Suitability reports can be cut down, Apfa says


Suitability reports should not sacrifice clear communication to clients in order to cover the adviser’s complaint risk, Apfa has said.

In a new guidance note on suitability reports, the adviser trade body urges planners to only write reports as long as is needed to address the client’s needs and objectives and make them aware of the key risks involved.

The guidance says: “The primary purpose of a suitability report is to explain to the client why you believe your recommendation is suitable given their needs and objectives and highlighting any risks associated with the recommended course of action. Focusing on this is in itself the best way to mitigate risk in terms of possible future complaints. However, the balance of the narrative should not be unduly weighted to risk mitigation which could distort the tone and the purpose of what is a valuable client communication.”

If advisers do use some kind of template, Apfa says this should only ensure key points are covered and leave room for personalisation, for example an area specifically for soft fact recording.

Apfa recommends “layering” information by placing less important points in an annex, but reminds advisers to include the most important information like costs and risks in the early pages.

The FCA does not require clients to sign off on suitability reports, Apfa notes.

From its discussions with the regulator, Apfa says it has now received clarification that objectives that were explored but not met by the recommendation should be highlighted, but that advisers need not list further possible objectives.

Apfa senior policy adviser Caroline Escott says: “We still believe that there is more the government and regulator could do to encourage advisers to produce more concise suitability reports. One such step could be to prune the number of different rules and regulations covering disclosure, although we recognise that many of these requirements come from European directives and regulations”

Apfa’s suitability report checklist

Before you send a suitability report to a client, check that it does the following:

  1. Contains a summary of the most important information in first two pages.
  2. Explains reasons for the recommendation of a product or investment with reference to needs and objectives.
  3. Highlights the key risks associated with the recommendation.
  4. Is tailored as far as possible to the client throughout e.g. uses customer own words.
  5. Expresses costs and charges in cash and percentage terms.
  6. Signposts clearly to standardised risk warnings and disclosures placed elsewhere.
  7. Avoids jargon wherever possible.
  8. Uses easily read font and contains white space.
  9. Has a clear logic which is easy to follow.
  10. Uses colour, bold text and boxes where relevant.



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There are 19 comments at the moment, we would love to hear your opinion too.

  1. Yes. It all makes sense to me but on the day when the Apfas actually speaks for the FOS maybe we’ll see this implemented or, put into practise by companies and advisers who presently have to watch their backs for what might jump up and bite them ten years down the line.

  2. Couldn’t agree more , it has got totally out of hand and fed the need to employ paraplanners . Like a school essay it should have a beginning , middle and end . If this ends up being 50 pages before disclosure docs whose best interests are we serving , apart from the Royal Mail . A short concise report plus kiids and disclosure is more than enough . After all we can only take in10 minutes of reading before we totally switch off and ignore it . I’ll bet FOS get plenty of complaints which are not upheld where the adviser has in fact explained everything correctly , it’s just the client couldn’t find it to allow the correct decision to be reached !

  3. So when can we expect the FCA to publish a suite of acceptable concise “specimen” reports so that we can make a value judgement on whether or not our own stack up?

  4. Love this type of click bait says he who has clicked. They always bring to mind those wonderful pithy idioms;

    ‘Be careful what you wish for’ – those users of our services who wish to abrogate all responsibility.

    ‘You have made you be now you have to lie in it’ – the F pack

    ‘Once bitten twice shy’ – those of us who labour under the F pack’s yoke.

  5. Its all very well for those who DO NOT carry the risk of getting it wrong, to enlighten us on how to do it right, be that the FCA, FOS, APFA, compliance consultants or any other person who wants to chip in their 2 penny’s worth !

    First and fore most, Sants did that (be afraid and arrow visits) part of his job very well the rest was, demolition.

    From a personal standing, I simply do not trust these people (FOS and the FCA in particular) one bit, the reason being is, its not until you get an audit, visit or complaint do you really get crystal clear clarity…… by then its to late.

    Until this trust has been restored (if it ever will be) I will treat every suitability report like an written exam (RO6,FP3)… points will be awarded if is written down, and cover every conceivable angle, lets face it if you do postage stamp reports you will miss something and that will be very expensive.

    In the real world we are not afforded to make mistakes whatever is said to the contrary, they trust us no more or less, than we trust them.

  6. If APFA says it’s ok then all is good yes? Are they underwriting their assurance? I think not, so I’ll carry on with my method but thanks for the guidance!

  7. As others have swiftly noted, the problem is the FOS and its tendency (not always, I will allow) to accept a complainant’s completely undocumented version of events over the defendant’s fully documented version. If the investment recommended doesn’t turn out at least as well as the client had hoped, the adviser is on extremely dangerous ground and all the risk warnings in the world are unlikely to save him from an adverse verdict.

    • I remember the PIA talking about ‘copmpliant churning’ i.e. as long as you put all the risk warnings and costs down it was OK. These days its about suitability so regardless of putting all the risks down you also need to ensure the recommendation is ‘suitable’ e.g. someone who only ever had cash on deposit; it is unlikely to be suitable if you recommended they move all their cash into asset backed investments. Most people that bought endowments were in that camp and regardless of the risk warnings if they never had investments before they were likely to fail the test.

  8. “………Apfa recommends “layering” information by placing less important points in an annex, but reminds advisers to include the most important information like costs and risks in the early pages……”
    To me, the above quote from APFA sums up all this subjective crap. One question to APFA regarding putting stuff into the annex. “Who determines what is important”? Answer The FOS because that is where complaints end up. I agree with DH. I too will continue to put war and peace together on SL’s until such times as FOS start regularly coming down on our side based on what is in it.
    I do pre-warn clients they will get huge letter which outlines what we are doing, who its with, why its suitable. The rest is a huge amount of guff designed specifically to cover my arse in case they ever decide to make a complaint because it is what I have to rely on.

  9. Isn’t everybody doing these things already anyway?

    Points 3, 5 and 6 could to a large extent be industry standardised and included in product literature rather than be included/duplicated in a suitability report. That would cut reports down.

    Re point 5 specifically; AMC, TER, OCF? Again, have one industry standard figure that is calculated in the same way, is explicit and reflective of true costs, and is shown in illustrations.

    • I think we are James……. just to prove a point at how ludicrous it all is, take point 5…… from my own part I express this in no fewer than 5 times, verbally, signed agreements (some times the provider requires its own one to be signed), signed propositions, illustration, and suitability report, and then to a degree in the CIDD this is mirrored again with 3 and 6 with other point of advice documentation and or after advice documents…… its just not good enough for some people to duplicate things we have to do it 4, 5, 6 times across many different mediums.

      I can remember a time when clients heads would be swimming with just the advice you gave, now the poor souls are flooded with a tsunami paperwork. Most of which is useless, take illustrations as an instance……. what a load of crap 10/12 pages that could be done in 2…. tops

      I don’t know about the rest, but I can remember conducting a 2/3 visit process, now it can run to 4 or 5 depending on the subject matter

      And who is this all for ? who “really” benefits ? is this “really” the cost of professionalism ?

      I tell you what it all is, its……… well not printable

  10. “We still believe that there is more the government and regulator could do to encourage advisers to produce more concise suitability reports”.

    Yes, they could start by regulating or banning the ambulance chasers.

    And I totally agree with DH above re illustrations these days.

  11. “Suitability reports should not sacrifice clear communication to clients in order to cover the adviser’s complaint risk”. In other words clear communication to clients is in addition to covering the adviser’s complaint risk. And in doing the latter, there is no reason why you cannot do the former.
    But to explain everything that forms part of the ADVICE process, point out the important bits of mandatory enclosures to at least put them into context for the client takes time, effort and inevitable diminishes the will to live of some clients when presented with a wad of paper ever if you break it down into bite size chunks.
    At the end of the day, Suitability Letters serve more than to meet the expectations of the FCA and what is included is there because it is good business practice.

  12. I’ve just had a very comprehensive suitability report checked by our compliance consultants, and the results demonstrate how easy it is to miss details in a very long report. Even if you are a trained file checker!

  13. It’s a chocolate fireguard….
    As Harry Katz has oft said, the best defence it to choose your clients VERY carefully. The ONLY complaint I have had since having my own business (1998) was from someone I knew was difficult, thought very carefully about NOT taking on as a client and in the end decided to take on but record the meetings (with her agreement). The suitability report would have been as much use as a chocolate fireguard despite being one of my best and most comprehensive. It was the recordings of fact when matched against the actual complaint itself claims which resulted in the solicitor (not the FOS in this case) realizing he might be on to a bit of a problem having made obviously false accusations on behalf of his client.
    Since recording all client meetings, but suitability reports have been massively shorter as any report focuses on aims and objectives and simply refers to any other document previously issued rather than redrafting it.

  14. IMO, having two copies of the SLA and the adviser and client sign both copies would eliminate a lot of the “I never read/said that” type.

    Secondly, putting War and Peace in every SLA is setting yourself up to fail the FOS test.

    Once the SLA Goes over say twenty pages, the clients eyes will glaze over.

    The FOS Will say the client did not understand the advice, and IMO rightly so.

  15. The FCA FOS and other incarnations of regulators have focussed on advice and documentation instead of where the real problem now lies, namely badly designed products. At first they were right to focus on advisers, because there were thousands of them who were either poorly trained or simply bad advisers. However, there are now relatively few badly trained or bad advisers, and so surely attention should now turn far more to products and providers, and indeed bogus (if not fraudulent)customer complaints and claims management companies. I think that clients should be far more responsible for understanding what they are buying, there is just too much protection for clients and not enough caveat emptor. Clients should be responsible for researching their purchases and have less ability to complain on the basis of not understanding. If advisers or sales people tell lies then they should be prosecuted not regulated. By coincidence I was at a networking breakfast this morning with two of my colleagues’ clients and we were discussing suitability letters and reports (yes isn’t that tedious when the bacon is crisp and the sausages are sizzling?). Both of them said they have zero interest in the contents of our reports as they are happy to trust the adviser and expect the adviser to point out all crucial points verbally. They confessed to neither remembering nor caring what the key points were when they bought into what my colleagues were recommending but that they trusted my colleagues’ advice. Proof that in natural justice terms they should not be allowed to complain if investment performance goes wrong unless my colleagues deliberately misled them. I think that Harry is right about choosing clients carefully and Phil is right that recording all meetings is a good way of ensuring the client, the adjudicator and the adviser are able to refer to a true record of events in the event of a complaint. And I think regulators cost too much for what they achieve.

  16. As Cardinal Richlieu is often quoted: Give me six lines written by the hand of the most honest of men and I will find in them something with which to hang him. So it won’t matter how concise or, at the other end of the scale, comprehensive a SR may be. Someone determined to find fault with it will do so.

  17. Just revisiting this article and ultimately the length and style of an SR comes down to how a financial planner can best present their recommendations in a way that their client can understand. The main risk really does come down to making sure that the information collected in the client questionnaire/fact find is verbatim to what the client has disclosed and which links in to the SR. Remember that when it comes to a case review the suitability report is just part of a client file and is nothing without the client questionnaire.

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