We know paraplanning is about much more than suitability reports.
Yet we can’t deny they are a fundamental part of the role, and definitely one of the trickier elements when it comes to getting the right balance.
Unfortunately, we find paraplanners still have the conflicting challenge of creating something that:
- Each client can refer back to, and fully understand exactly what has been recommended;
- Is considered compliant (bearing in mind this will mean different things in different firms) and covers all regulatory requirements;
- The adviser is happy with. Each adviser will also have their own preferences, which is understandable given this is the written representation of their relationship with the client.
So, it is not surprising there is no one-size-fits-all approach to suitability reports.
However, paraplanners should consider the following as a starting point.
It's worth knowing the compliance requirements within a firm, as indicated by either the internal compliance team or external support. This should be broadly fixed and something the paraplanner gets familiar with at the outset.
You should consider the adviser this report is representing. Are they focused on it being as efficient and short as possible, or are they a detail person who would prefer there to be more information, to allow them to have a more thorough conversation with the client?
Also, think about the client and the advice. An experienced investor doing an Isa top-up will require a different approach to someone getting advice for the first time and consolidating a number of plans accumulated over the years.
Do not be afraid to bring this level of personalisation to each case. The importance of suitability reports should not be underestimated. This approach will help maximise the potential of achieving their ultimate goal: to put the client in a clear, informed position.
The report should cover five key elements. Most reports comfortably cover the first three…
Who is the report directed at? This is usually straightforward enough, but it's important to consider the 'who' element carefully where there are multiple clients, or where there are powers of attorney or trusts involved.
What exactly is being recommended? This is very tangible; for example, an investment into a general investment account or a transfer of existing pensions;
Where are the funds being recommended to go? This will cover both provider and investment strategy.
A compliant report will cover these first three points. But a really good report, one that provides context and clarity, and helps the client understand the advice in relation to their own goals, will cover the following points too…
When I started in financial services, suitability reports were called Reason Why letters, and that remains a fundamental factor.
Why exactly is this the advice being given right now, for this client? Why the pension transfer? Why that provider over others? Why that investment strategy for their risk profile and objectives?
If the why is a shorter-term consideration, the how is the longer-term issue.
How will this advice ultimately meet the client’s objectives? Any recommendation is unlikely to achieve goals immediately, but it may be the starting point for setting clients on the path to hitting them. The suitability report should be able to position the advice in that way.
Advice suitability isn't dependent on the suitability report alone; it is based on the whole file and every stage of the advice process.
But there's no doubt the report is the focal point that pulls all of these facets together. It should give a firm comfort that a client’s understanding has been at the core of the process.
Overall, having a starting point of understanding the compliance framework in which you are operating, then tailoring the report to both the client and advice type, as well as the adviser’s preferences is key.
By adopting this approach, and by giving it a final review at the end as to how clearly the 'why' and 'how' are covered, should help take your reports to the next level.