Beyond the Checklist: Advanced Techniques for FCA-Compliant Financial Reporting

Effectively Tailor Reports, Highlight Risks, and Ensure Comprehensive Client Understanding

At "Compliance Consultant" we are often asked to review documentation to respond to the FCA, create customer facing documentation or review template wording for use in reporting.

Our findings are detailed and quite often astonishing. Firms and advisers don't know how to keep it simple, clear and relevant. They wax lyrical about various elements that have little or no bearing on the matter at hand, often returning to resell the deal or produce a word salad with lashings of superfluous dressing.

Based on FCA guidance, here are some key ways firms can better articulate their compliance with FCA requirements or ensure clarity with their clients in their documents:

1. Tailor suitability reports to each individual customer, avoiding generic language. Explain clearly how recommendations meet the specific preferences, objectives and characteristics of that client.
2. Use plain, clear language throughout documents. Avoid jargon and complex terminology.
3. Explicitly link recommendations back to the client's stated objectives. Show how each recommendation helps achieve the client's goals.
4. Provide a balanced view by highlighting both advantages and potential disadvantages/risks of recommendations. Give equal prominence to risks and drawbacks.
5. Clearly explain costs, charges and potential penalties associated with recommendations. Present these in pounds and pence where possible.
6. If providing limited advice, explicitly state what objectives or needs are not being addressed and why.
7. For replacement business, show clear comparisons between existing and new products on a like-for-like basis.
8. Include a clear summary of the advice given and how it meets the client's needs at the start of suitability reports.
9. Explain the reasons for assessing suitability as being to act in the client's best interests.
10. For ongoing services, clearly set out what will be provided, how recommendations will be reviewed/updated, and the frequency of reviews.
11. When responding to FCA information requests, clearly state what statutory power is being relied on and ensure compliance with the specific scope requested.
12. Demonstrate open and cooperative dealings with the FCA, in line with Principle 11.

The key is to be clear, specific, balanced and client-focused in articulating how regulatory requirements are being met. Avoid generic language and explicitly link back to individual client circumstances and FCA rules.

If you like what you see hear, and want to discuss your own communications or documentation, please call us on 0800 689 0190 or email [email protected], today!