This section brings together in one place key material about the advice process and should be an important reference point.
You’ll find a range of material which provides further help about what suitability means in practice and the areas you should be considering. We will update this section as more material becomes available.
You can provide us with feedback by emailing [email protected]. We will not be replying to emails routinely but all will be considered and we will review how we can make improvements.
Know your client
You must obtain the necessary information from the client to be able to make a suitable recommendation. This includes:
- their financial situation
- their investment objectives
- information on a number of issues relating to risk, ie the client’s risk profile (attitude to investment), capacity for loss and knowledge and experience of investments
Research and due diligence
We use this expression to refer to the process carried out by firms to assess (a) the nature of the investment (b) its risks and benefits and (c) the provider (to establish if the provider is an organisation to which they believe it is appropriate to entrust client assets). You need to understand these factors in order to judge whether a solution is suitable.
We have undertaken a thematic review on research and due diligence.
Making recommendations to your client
When it comes to making recommendations, here are a number of issues that you should consider:
Centralised investment propositions (CIPs)
If you operate a CIP in your firm then you need to ensure you:
- consider the needs and objectives of your target clients when designing or adopting a CIP
- consider the suitability of advice for clients on an individual basis - don't ‘shoehorn’ clients into the CIP
- establish a robust risk identification and control system to mitigate risks which might arise from the specific characteristics of a CIP
When undertaking replacement business, then you need to ensure you:
- consider objectively your clients’ needs and objectives
- collect necessary information on your clients’ existing investments and the recommended new investments, such as the product features, tax status, costs and the performance of the underlying investments
- implement a robust risk-management system to mitigate the risk of unsuitable advice and poor client outcomes
If you have an insistent client then you need to ensure you:
- provide advice that is suitable for the individual client (ie the normal advice process)
- clearly explain the risks of the alternative course of action
- be clear that the client's actions are against your advice