It is an unfortunate consequence of the litigious society we live in that many IFAs consider suitability reports to be predominantly a back side covering exercise.
Their mindset, installed in them, by fear of complaints and an often overly cautious compliance department is probably the reason, but does it need to be this way?
Wouldn’t it be nice if we could change perceptions to one where instead of starting to write a report with the above in mind we instead asked:
What does my client need to know to understand why I am making these recommendations?
In this piece I consider the structure of suitability reports and what needs to be in them.
If we look at the FSA factsheet on suitability reports it states you have to cover the following:
1) Summary of current situation
2) Customer goals
3) How the recommendation meets the goal
4) Areas where advice is restricted and the implications of this
5) Parameters & risks
‘Simples’ as a well known furry creature is often heard saying, but how many actually follow it.
Having read these reports for over 12 years now I believe it can be ‘Simples’ and here are my top five tips for writing a successful report.
1) Always start writing the report with the client at the forefront of your mind. Might sound obvious, but many reports are still written for the compliance department with little consideration given to what the adviser thinks the client might want to know.
This becomes immediately obvious when they are written in the third person and stretch to 30 odd pages.
The majority of clients don’t want to and probably won’t read a lengthy report.
2) Focus on the client’s personal and financial priorities. Unless the client can relate to what the report is trying to achieve you have lost engagement before you have really started.
‘You want to review your investment bond as it has been in force for more than 5 years’ or ‘You want to review your pension to see if you should transfer it’ are not client priorities; they are adviser priorities.
A client can relate best to their own words and this in turn will keep them engaged.
An example could be as simple as ‘I want to ensure I can afford to retire at age 60’.
3) Remember the key points of any report are:
1) What is the current situation and what is the client looking to achieve?
2) How much risk are they prepared to take?
3) What is the advice?
4) How does the advice help the client with what they are looking to achieve?
5) Is there anything else worthy of consideration?
6) Is it affordable / costs / fees etc?
Create your own headings, stick to them and keep them brief.
4) Keep your points short and punchy; long paragraphs should be avoided as should the use of technical jargon and too much technical information.
Bullet points work well as do charts and diagrams; they break up the monotony of the written word and can be used effectively for displaying certain key bits of information.
5) Use Appendices wherever possible. The more technical issues such as investment philosophies, product explanations, generic risk factors etc can all be held in Appendices which help provide background information to support your advice and meet your regulatory commitments without detracting from the why’s and wherefore’s the client is primarily interested in.
By disclosing this information via standard documents you are allowing the report itself to concentrate on the client whilst at the same time ensuring a consistent message is provided to all your clients irrespective of who’s advising them.
In Summary, we appear to have lost sight of who we are writing these reports for and to gain the level of engagement we would like with our clients we have to address this.