There is a definite and understandable movement towards shorter suitability reports. While this is generally positive, it is important to remember the suitability report is a durable and visual representation of the service we deliver.
Years after the face-to-face interaction has been forgotten, the suitability report will still be there and it may well be the only thing we can be judged by.
As a result, while I am among the first to support the removal of pages of interminable and impenetrable jargon, we should be careful to avoid jettisoning the infant with the bathing fluid.
Regulation does not require repetitions of personal facts the client already knows or endless analysis of alternative solutions
Over the years, suitability reports have tended to get longer and longer to cover an ever-growing list of compliance requirements. Some of these were certainly required, if not necessarily helpful, however others were either a clear case of covering one’s hurdies or a slavish adherence to the compliance department’s incipient paranoia.
Thankfully, this has now been largely recognised and many advisers are looking to remove much of the padding. Regulation does not require repetitions of personal facts the client already knows or endless analysis of alternative solutions to the one actually being recommended.
This information must certainly be collected and held on file but it does not have to go into the suitability report (or, if it does, a summary or an appendix should be sufficient).
A cashflow chart is a must and we must back this up with an Office for National Statistics life expectancy graph
The suitability report must do four things:
- Outline the client’s needs and objectives
- Make clear recommendations for action (or in some cases inaction)
- Explain why these recommendations meet the needs previously outlined
- Outline the potential advantages and disadvantages of the recommended action
There are, of course, requirements to disclose fees and charges, risk assessments and product data and it is necessary to create a structure which covers the essential points in a logical fashion, which brings me to my point.
A four-page report may be very laudable, especially for simpler advice issues, but it is not always more readable. Some things are worth including, even if they are not a compliance requirement, and they also result in a longer report.
Font size
I have seen reports which are certainly short but as the result of squeezed text and a fair amount of ‘small print’. Dense text and long paragraphs do not improve consumer understanding, they are significantly less likely to be read at all. Clear section breaks, coloured text and a ‘comfortable’ font size improves both the look and the readability of a document, even if it is longer as a result.
Pictures
Studies show people are likely to remember more of a message if it contains both words and pictures, and even the most sophisticated investors can benefit from suitable imagery. I’m not talking about nice ‘into the sunset’ images – although they can add colour – more diagrams and charts.
Years after the face-to-face interaction has been forgotten, the suitability report will still be there and it may well be the only thing we can be judged by
For advisers specialising in retirement planning, a cashflow chart is a must and we must also back this up with an Office for National Statistics life expectancy graph. Neither is a regulatory requirement but one of the most valuable things an adviser can deliver is a realistic view of how long retirement income needs to last and an appreciation that future shortfalls will either have to be funded somehow, or the client must do without.
Executive summary
I am also a big fan of the executive summary. The Financial Conduct Authority uses it in its reports and if it’s good enough for its own publications it can hardly consider it unsuitable for clients. However, because it is a summary, everything in this section is a repetition of information that appears elsewhere and could be considered superfluous.
Set against this is the reality many of our clients will not read all of our carefully-crafted wording, especially if it covers issues unfamiliar to them. Putting an executive summary up front ensures that, even if they don’t follow the whole of the report, they should understand what is being recommended and why.
Fiona Tait is technical director at Intelligent Pensions
Fiona
Perhaps un unwise choice of words – albeit perhaps true! “Size matters!”
I have worked as a Paraplanner in the past. Doing the research and writing suitability reports for advisers to present to their clients.
From my experience, it became more of an exercise in covering your behind. As opposed to producing anything that could remotely, be described as user friendly, from a client’s perspective.
I had no real say in how these reports were produced, having to adapt standard paragraphs to cover the needs identified. But when I used to get frustrated with the constraints of the job and say to the advisers “Do you actually expect your clients to read and understand these reports?” The answer would invariably be the same. “How many clients actually read these reports? The main point is that we are covered in case the FCA want to investigate the past advice that we have given.”
Maybe, I look at things from a different perspective from most clients. Because I have worked in the business.
If I were paying for financial advice. I would want a report that was easy for me to read, included all the salient facts and which I could actually understand. I don’t think that is too much to ask for. Especially when you take into account the size of the fees many advisers charge their clients.