Using our templates, what you need to know!
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By Hannah Keane
If you’re looking for consistency in your suitability reports, then using our new templates could be a wise move. They’re seen as a way of offering “best practice”, as they allow the financial planner to demonstrate that they’re treating all their clients in the same, fair, way.
Here at Weparaplan, we have reviewed many templates over the years so we know our onions.
With this in mind, let’s now consider what should and should not be included in a suitability report, the area that many people get wrong, as well as how you can ensure it’s more engaging for clients.??
Beware of including too much information
A common complaint with suitability reports is that they include areas of the advice process that don’t need to be there. This can make a report overly long and complex, making it hard for the client to follow.
Generally speaking, the three subject areas that need to be included in a report are:
Objectives
Consumer Duty makes it clear advisers need to work toward their client’s objectives. This paragraph is key.
Only include information about the client’s circumstances that helps demonstrate the suitability of the advice being provided. For example, include the client’s objectives that explain why your recommendation is suitable.
Steer clear of generic statements that are used all the time, for example, ‘You want to invest funds to achieve a level of capital growth that is higher than if the funds remained as cash’. Instead, focus on client-specific objectives that are unique to your client and get to the heart of what they want to achieve and why.
Each objective needs to be consumer focused and have all the necessary detail to help the consumer bridge the gap between their objectives and your reasoning for the recommendation.
Client circumstances
This section should be personalised for each client and include enough information to make it clear that you have taken the time to properly get to know them. Again, the client’s circumstances need to be relevant to the advice being given in the report. It’s always a good idea to use the client’s exact words in the report, so you may find it helpful to record your meetings. Also, mention anything that backs up why a withdrawal is required if this is being recommended in the report.
You don’t need to relay all of the client’s personal information back to them, as this should already be recorded in the fact find. The client already knows how old they are, where they live and what their spouse is called! Instead, focus on the areas of the client’s life that are relevant to the advice being given, and try to make it as personalised as possible. In theory, the client’s family or close friends should be able to read the suitability report and agree that the adviser has properly understood their needs, objectives and circumstances. ???
Irrelevant information
A good example of this could be Inheritance Tax (IHT). I have seen pages of information regarding IHT in a suitability report, even when the client file shows the client is not liable to the tax. Furthermore, they are never likely to.
Avoid generic/complicated information that might not be easily understood by the client. For example, when recommending a provider, don’t include facts like ?financial strength ratings or things that aren't relevant to the recommendation (e.g. when the company was founded, their assets under management, etc.) Instead, focus on why the provider is suitable for this client. This will vary depending on what’s important to the client, but could include things such as a good online access facility, reliable customer service, low costs, or the ability to open certain types of accounts on the platform.
Only include information that is relevant to the client’s financial situation and the recommendation you are putting to them.
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Analysing existing plans
When analysing an existing plan, include the following:
-?????Comment briefly on the current fund and if it remains to be suitable
-?????Comment briefly on fund choice
There is absolutely no requirement to go into masses of detail about the fund, including asset allocation or management style, if this will just confuse the client. However, you could comment on this, in a client-friendly way, if this is something that makes the fund particularly suitable or unsuitable for your client.
If you're using lack of suitable funds ?as a rationale to recommend a transfer, you must cover why none of the funds available are suitable.
When analysing a pension plan, there are some other areas that must be covered, including but not limited to:
-?????Comment on any guarantees, PTFC, etc.
-?????Comment briefly on the range of options for the client at retirement. If you are using this as a reason to recommend a transfer, then you will need to go into more detail as to why this would benefit the client.
-?????Mention whether the charges are competitive.
-?????If the client holds a With Profits fund, you will definitely need to go into more detail explaining what With Profits is, and covering any bonuses, etc.
Finish this section off with why the plan is or isn't suitable and if you're recommending a transfer and why.
Get in touch
Producing documents that “cover your back” but a client cannot understand, or is never likely to read is not what Consumer Duty is all about.
The best way to cover your back is to produce concise and clear suitability letters that your clients understand and can relate to. This will enable them to make an informed decision, which is far less likely to end up in a complaint.
If you would like to see our suitability report templates that can easily personalised, whilst remaining robust and concise?contact us?online?or by calling?01472 728 030.
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Great article, I personally can't wait for the day when I'm writing reports like this! I feel some of these 50+ page reports are posing more risk as the clients don't read them ??