Regulation 

Guide on how to deliver suitable advice launches

Guide on how to deliver suitable advice launches

Adviser-built platform Nucleus has partnered with regulatory specialist Rory Percival to show advisers how they can get suitability right in practice.

A new guide, available to download from Nucleus, addresses how an adviser's business can be compliant with latest rules and regulations, and offers information and action points devised by the former FCA technical specialist.

Nucleus and Mr Percival will also host masterclasses in Edinburgh and Birmingham, on May 14 and May 21 respectively, where the latter will explain the FCA’s approach to assessing suitability and discuss the key questions the regulator asks when undertaking a client file review.

The conversation around suitability and ensuring the delivery of suitable advice has been long running but latest regulatory changes have added to the discussion.

Mr Percival said: "The then Financial Services Authority first published its guidance on assessing suitability as part of its work on risk profiling tools back in 2011.

"It is fair to say the market has changed somewhat, and the concept of suitability has permeated into every aspect of advice and financial planning."

Barry Neilson, chief customer officer at Nucleus, warned while the main rules around suitability in the industry have remained the same, advisers have had to adapt to a "fluid regulatory backdrop" with the likes of Mifid II and Prod "clouding the waters". 

He said: "Along with the likes of pension freedoms and defined benefit transfers there is a myriad of reforms and regulations that now go into the advice process, and as such it is a good time for advisers to review how they deliver advice to their clients."

The product governance element of Mifid II, which was introduced in January last year, is aimed at making sure advisers are offering their clients suitable products by requiring them to identify target markets.

A cost disclosure requirement under Mifid II also came into effect in January 2018, but it is only this year advisers have had to begin disclosing actual costs and charges associated with client investments, rather than just estimates.

In November last year consultancy firm the Lang Cat published research suggesting there was "widespread confusion" about compliance with Mifid II's product governance rules, with half of advisers not able to evidence suitability.

The Lang Cat research found that while the majority (80 per cent) of the 220 advisers surveyed were aware of the rules, 62 per cent were unable to evidence the suitability of products and services by client segment to the standard they required.

In Nucleus’ own census of its advisers just more than half, 54 per cent, believed the new cost disclosure rules under Mifid II would make charging more difficult to understand. 

Mr Percival said it was clear advisers wanted to act within the rules, but he warned interpretations of product compliance rules may be lacking.

He said: "Advisers are well versed in navigating an ever increasing regulatory world. But despite the changing environment, at their heart suitability rules are all about acting honestly, fairly and with integrity, and most importantly putting clients’ interested first.

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