You need to gain enough information from the consumer to be in a position to make the recommendation, including their specific needs and objectives. Bear in mind that you are accountable for any advice you give.
If you rely on external research, Simon Thomas, head of policy for Tenet, warns you are still liable.
“You cannot blame someone else. You must have confidence in your external research and the appropriate process to deliver it.”
Only after you have completed due diligence on the research tool can you then be satisfied that it is accurate and reliable.
Stephen Gazard, managing director of Sesame Bankhall Group, adds you should conduct regular reviews to continue to monitor this. Even then, he said you should bear in mind that no tool has all the answers.
“You must rely on your knowledge and skill as an adviser to use the information provided by the tool in order to make your recommendation.”
You should use a structured fact finding process and undertake a risk profiling exercise, according to Mr Gazard.
Secondly, you must thoroughly understand the products that are to be considered and the actual product you are recommending in order to determine whether it will meet your customer’s needs. This can be achieved through CPD and knowledge testing.
“Consider FCA opinion on products and Financial Ombudsman Service (Fos) feedback on similar situations.”
Regular independent reviews of client files selected on a risk assessment basis should also be undertaken by a competent and qualified individual to ensure that the third party also agrees the recommendation is suitable, Mr Gazard contiunues.
Remedial action should be completed if required to address any weaknesses identified. Ensure that the suitability report is well structured and in line with the information you have collected during the advice process.
When it comes to suitability reports, Mr Gazard says it is quality over quantity every time.
“The FCA has openly criticised overly long and complicated reports that consumers are unlikely to read and do not help them to understand the recommendations. It is often useful to refer back to conversations you’ve had with your client during your meetings.
“We would suggest that a sample of your letters are reviewed and commented upon, by a competent, qualified individual.
“You could use professional letter writing tools and work from structured checklists to produce your letters to ensure that you include the relevant information – however, you should always tailor your reports to include information pertinent to your client.”
Rebecca Prestage, head of policy of The Consulting Consortium, agrees it was vital an adviser had a clearly documented understanding of the client’s needs and objectives, in the short, medium and long term, as well as a clear understanding of the products they are recommending and how the products are designed to meet the specific needs of the clients and their objectives.
