Suitability letters Better Business Regulation – The Financial Services Authority (FSA) has told paraplanners they should challenge their financial advisers on suitability letters to help meet regulatory requirements and improve relationships with clients.
Speaking at the Institute of Financial Planning’s Paraplanner Conference, Chris Hewitt, a member of the FSA’s Investment Intermediaries Department, explained some of the points raised in the regulator’s recent guidance consultation on centralised investment propositons and replacement business. http://www.ifaonline.co.uk/ifaonline/feature/2165968/replacement-business-guide-practice
With firms failing to demonstrate replacement business suitability in around 75% of cases it looked at, Hewitt detailed how paraplanners could help.
He said: “All too often we see firms missing the opportunity to really understand their clients’ goals. This is demonstrated by the use of generic objectives across all suitability letters, such as on investment growth.
“We see such generic statements and you should challenge your adviser to find out what is driving this objective.”
He went on to explain how this could mean finding out how much additional money is required and when the client might want to cash assets.
He added that getting to know about more key objectives, such as saving for a house deposit or for university savings, would help build a better relationship with the client.
“This greater understanding of the client will assist the firm in providing a service which really adds value,” he said.
“Isn’t this really what the client is paying for, rather than just investment growth.”
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