IFAs need clarity over suitability reports

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IFAs need clarity over suitability reports

The lack of clarity with the endless requirements, cost and time it takes to prepare a suitability report is “knocking the stuffing out of IFAs”, Sam Caunt has said.

The financial planner at Northampton-based Future Life Financial Planning said that in some cases it can take up to three days for an adviser to write a suitability report, in which he must explain all options, consider all risks, state what has been recommended and what has not, explaining why, as well as giving reasons why other options were discounted.

He said: “The industry is not clear on what needs to go into a suitability report. We hear the argument that we advisers need to cover ourselves, which we do anyway, but when the information is clearly and emphatically documented elsewhere and on file, why should we need to put it into a long suitability report?”

Moreover, the regulator was not clear about what needed to go into a report. The FCA has only stipulated three elements: the client’s objectives, why the advice is suitable, and possible disadvantages. But Mr Caunt said the reports should go further than this – without overloading the client – and called on the FCA and Fos to do more to make sure the client had all the necessary information.

Keith Richards, chief executive of the PFS, said: “We have engaged with both FCA and Fos regarding adviser concerns and frustration over the effectiveness of suitability reports. The FCA and Fos are attempting to provide more clarity, and have acknowledged that the length of the reports is not client-friendly. Nor do they deliver much benefit given that some of the key information is lost in the body of the reports.”

Right to Reply

David Cross, spokesman for the FCA, said: “Suitability reports are important; they explain to the customer how and why your recommendations meet their needs and personal goals.

“We have provided clarity on the issue, not least in the factsheet available on our website. This includes tips on how firms can make suitability reports easier to read and more readily comprehensible.”