FCA Suitability Report Guidance: What does the regulator expect from you? Part I

FCA Suitability Report Guidance: What does the regulator expect from you? Part I

Ed Evans

The FCA has recently updated their Suitability Report Factsheet. This factsheet is essential reading for individuals who prepare suitability reports and / or monitor the quality of suitability reports prepared by others. It provides guidance under the following headings:

1. What does the FCA expect from you? 2. Good practice examples.

To be honest there’s nothing particularly new here, but I thought this would be a good opportunity to have a recap of the points raised and highlight how Genovo deals with each of them. This week I’m going to look at what does the FCA expect from you?, and next time I’ll be covering the good practice examples.

1. Each suitability report should be tailored to the customer.

Within Genovo every suitability report is created afresh and the user is actively encouraged to provide a high degree of personalised and client-specific wording. This not only ensures the report is tailored to the customer, but also avoids the perils associated with rehashing old reports and the risk of unrelated client information being inserted.

Genovo also provides the facility to completely personalise the reasons for your advice and tailor the structure of each report to reflect the client’s profile.

2. Suitability reports should use clear and plain language.

Genovo adheres to the principles of the Plain English Campaign and tries to keep technical / industry jargon to an absolute minimum. Where jargon simply can’t be avoided, Genovo will automatically include a layman’s description of that term in a glossary of terms within the appendix of the report.

3. Suitability reports should explain the reasons for all recommendations and how they relate to the customer’s objectives.

Genovo is a multi-section / multi-product suitability report builder and provides numerous prompts to confirm the reasons for your recommendations. It is essential within a suitability report that the reasons for your recommendations link back to the client’s specific objectives and hence why Genovo users are actively encouraged to provide additional know your client information for each objective and customise any standard advice reasons and / or add their own.

4. Suitability reports should highlight the risks associated with the recommendation.

Within Genovo risk warnings relevant to the area / type of advice you are providing and the product(s) you are recommending are automatically added to a dedicated risk warnings section within the main body of the report. As per the FCA’s suggested best practice tips, the risk warnings are also surrounded by a shaded box to highlight their importance and draw the reader’s attention to them.

5. Suitability reports should explain the costs, charges and potential penalties attached to the recommendations.

Users of Genovo are prompted to provide all of this information at the appropriate time and present it in a format that the client can easily understand i.e. In £ and pence as per FCA best practice guidelines.

6. Suitability reports should provide a balanced view.

This follows on from a number of other points raised here. Within Genovo topics like disadvantages and risk warnings are given equal (if not greater) prominence within the report as any other aspect of the recommendations.

7. Suitability reports should highlight if you have omitted any objectives.

Within Genovo you are prompted to confirm whether the advice is being provided on a full or limited advice basis. If limited advice is selected, a paragraph warning of the associated risks is automatically inserted into the report. During the report building process, you are also prompted to confirm whether the client has any other needs or shortfalls that have not been addressed at that time and confirm the reasons why.

8. Suitability reports should highlight how the customer will be advantaged or disadvantaged by the advice.

I can’t imagine many suitability reports get picked up by the FCA for not sufficiently highlighting the advantages – the same probably can’t be said for the disadvantages. Users of Genovo are actively prompted to confirm the disadvantages associated with their recommendations. It is important to note here that a disadvantage is different to a risk warning.

9. Suitability reports should show evidence of comparisons on a like-for-like basis where an existing plan has been cancelled and a new one devised.

If a user recommends any form of replacement business within Genovo they will be automatically prompted to compare the charges and performance of the ceding and proposed new plan on a like-for-like basis in line with the FCA’s suggested best practice guidelines.

Next time I’ll be looking at the good practice guidelines – Subscribe and get email alerts whenever we update our blog.

Image courtesy of bplanet / FreeDigitalPhotos.net

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