Suits you, sir?

I suspect most advisers will be fine, and will pass this ‘check’ with flying colours, a few will get some ‘guidance’ on improvements, and a few will face a further probe. Of course, it is perfectly fair for the regulator to check up on advisers.

After all, that is what it is paid handsomely to do. I have a suspicion, however, that there is another motive. There may well be concerns that suitability reports could be much better – the Financial Advice Markets Review talked codedly about seeking improvements.

For advisers, suitability reports are at the heart of what they do. When giving advice, a key question is whether the advice is suitable for the client.

What is suitable for one may not be suitable for another. Some clients may be very happy to invest in highly risky derivatives, for example. Others would run a mile from these investments.

The blanket selling of products with little regard for suitability is what caused many of the mis-selling problems of the past.

I was talking recently to a financial adviser about suitability of advice and how advisers could provide evidence they gave good advice which the client well understood.

His view was the advent of new technological tools such as video calling, which could be recorded, would help protect the adviser from compensation claims in the future.

But he added that there was a period, perhaps from the mid-80s to the early 2000s, when advisers could be exposed to claims they may have given unsuitable advice to some because evidence to support their advice was poor.

He was also concerned about the lack of a long-stop on claims and the risk of some IFAs being pursued by ‘ambulance-chasing’ firms now running out of PPI claims.

Could investment advice be the next target for their attention, he pondered?

I have to say, I agree the risks are there and the regulator will need to be both careful and sensible in its probe. Perhaps concerns about ambulance-chasing claims firms turning their attention to advisers lie at the heart of this latest FCA exercise? Time will tell.

The risks are there and the regulator will need to be both careful and sensible in its probe

On the positive side, it is probably fair to say that advisers these days have never spent so much time checking that their advice is suitable for clients, and rightly so.

Whether that was always the case in the past, in the days of juicy commissions and ‘sell at all costs’, only those IFAs who gave this advice will know. So where to next for this particular probe, and where does it end? Most advisers will have no answer to the first question and an answer of “never” to the second.

It is right, as I mentioned earlier, that advisers and their suitability advice are subject to regular regulatory scrutiny, but I cannot help thinking that some of this attention is a little excessive at times, and maybe mis-directed.

The paid financial advice sector has, to be fair, utterly failed to reach the mass market in the UK, and that is not going to change with this probe. The quality and professionalism of financial advice in the UK has never been higher – yet also so unaffordable for millions.

That is a bigger issue for the sector and the regulator, but admittedly not easily solved. New financial technology will help, but this also opens up a whole host of new issues around suitability that the regulator has barely begun to tackle.

Clients who decided to manage their financial affairs on a low-cost but virtually advice-free platform are taking many risks, but do they understand these risks?

Some will be gambling with their pension and life savings at the equivalent of an online financial roulette table, and many will get their fingers burned. What does suitability mean to them, and how can they be protected against their own lack of knowledge and inexperience?

These are important questions for the regulator to consider as digital platforms grow and many decide they would rather take a risk than pay for advice from the professionals.

Ultimately, it seems that we could be heading for a financial car crash, with online advice and the claims chasers likely to be the only winners. The robo-advice firms will try to avoid any responsibility, but in our claims-hungry, fault-blaming world, this may not be so easy.

If we are to avoid huge numbers of suitability claims in future we need better financial education so that clients have at least some grasp on what risk is, how it works and what is suitable for them.

Clients must be a key part of the suitability process, and the best suitability report is one written by both the adviser and the client. It is, at the end of the day, a joint undertaking.

Kevin O’Donnell is a financial writer and journalist