There’s been a lot of focus in recent years on suitability reports and making them shorter. You’ve probably read the much-reported ‘three things that need to be a suitability report’. These are:
- The client’s objectives
- Why the recommendation is suitable
- The potential disadvantages
A couple of additional points apply for replacement business and for clients going into drawdown, but that’s about it.
The regulator is very keen for suitability reports to be very short and to simply refer to other documents, rather than replaying the detail.
Alongside the super-short suitability report, we’re required to provide illustrations, KIIDs, key features documents, terms & conditions etc, which tell the client everything else they need to know, and lots that they don’t. This paperwork can easily amount to a couple of hundred additional pages. Is it fair to expect the average client to navigate this?
At the opposite end of the spectrum, we have networks, whose compliance requirements are often somewhat over the top, as they seek to protect themselves from potential complaints in the future. These reports, which are often heavily templated and dense with text, seem to give little consideration to the poor client who has to read it all – or the risk of them not reading it at all.
I recently found myself on the other side of the fence, so to speak. I received a suitability report that had been drafted for my parents by their adviser. They wanted me to read through it and tell them whether they should accept the recommendations.
As I took the document out of the envelope, my heart sank
Reading this report seemed like an arduous task. My dad admitted he hadn’t read his report, didn’t want to read it, and had simply passed it straight to me.
It’s easy for us financial advisers and paraplanners to forget that the client is unlikely to be as au fait with financial products and terminology as we are. Sometimes we expect a lot from the layman.
It feels like we still have a long way to go, not just with suitability reports, but with all reams of additional documents that accompany them. Whether Brexit will eventually make this better or worse remains to be seen.
The financial plans we put together for clients sometimes need to be complex to achieve their aims
But the suitability reports we write to explain it all need to be simple, summarising the important stuff. This is how we make things easy for the client, rather than directing them to numerous other documents. The aim is that the client reads the report and is then in a fully informed position before accepting the recommendations.
The report summary can tell the client all the important points in just a few pages. The detail follows in the next section of the report, so the client can delve deeper if they want to.
To make a report easy to navigate and digest, we use clear headings, a decent sized font, breaks in the text, a splash of colour here and there. We translate the industry lingo into something more reader-friendly and we avoid the very formal and clunky language that tends to be used in a professional setting.
While the report length will depend to a degree on what the advice is and the financial experience of the client, somewhere between the two extremes of the FCA’s minimalist approach and the networks’ kitchen sink approach, is the ‘Goldilocks’ suitability report. Not too long. Not too short, but…just right.