Regulators have met with financial advisers’ representatives to develop guidance on suitability reports.
The Financial Conduct Authority (FCA) and Financial Ombudsman Service (FOS) have held talks with the Association of Professional Financial Advisers (APFA) and the Personal Finance Society (PFS).
The FCA does not want set out prescriptive rules for suitability reports Chris Hannant, director general of APFA told FT Adviser. He says that the regulator expects reports to be presented in a clear manner, to be personalised and avoid long lists of options. “It has also got to be specific to the individual client, with things like ‘we are recommending X because you said you wanted Y’,” he said.
The FCA’s drive for brevity conflicts with much current industry practice. Concerns about future complaints means that some advisers are including information to protect themselves rather than add value for their clients, Keith Richards, chief executive of the PFS, told FT Adviser.
Some advisers are also concerned that the FCA’s preference for succinct suitability reports is at odds with the FOS’s approach to handling subsequent claims. “The problem is the FOS wants lots of detail. When it comes to the crunch, the FOS will look through everything and if it’s not written down somewhere they are going to go for it,” Matthew Walne, managing director of Santorini Financial Planning told Money Marketing.
APFA has said it will produce a guide on suitability reports in the next few months according to a report in Money Marketing.
“Getting suitability reports right is very difficult for advisers, so greater guidance from regulators and trade bodies would be welcome,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks. “In the absence of guidance, liability and insurance issues are further distorting the situation, as financial advisers and their insurers understandably want to protect against speculative and opportunistic claims.”