Incomplete fact-finds. 5 sections commonly missed out, and why this puts you at risk

It’s fair to say that financial planners are highly qualified professionals who lead extremely busy lives.

This though, causes an issue for many experienced and competent advisers. Many can fall into the trap of not using a fact-find properly, often in a bid to save time. While understandable, this has the potential to create short-term gain for long-term pain.

Without a fully completed fact-find, defending any recommendations you make is going to be tricky if a complaint is made against you, or an FCA investigation is held. What’s worse, your thinking is probably right, but not being able to demonstrate it due to a poorly filled out fact-find is likely to cost you dear.

Incomplete fact-finds

Read on to discover the five areas within a fact-find that are most commonly left empty, and why doing so may be cause for concern.

1. Soft facts are essential – but often neglected

This is top of the list. All too often we’ll see two to three lines that provide no real insight into the client’s life, experiences, or financial goals.

While the importance of soft facts is often underestimated by planners, they provide a detailed picture of your client’s attitudes to investing, why they have the goals they do and their previous investment experiences – whether good or bad.

This might be, for example, explaining that your client lost money on a previous investment, which is why their chosen attitude to risk is lower than their profile. Doing this helps explain areas of your recommendation that could otherwise be open to question, or a possible complaint.

One particularly effective way of using soft facts is to quote clients’ comments, as it provides a very solid defence should a complaint be raised. It also helps you during the presentation meeting, as quoting a client’s words back to them helps remind them why they need the product you’re suggesting.

2. Make sure you demonstrate the rationale behind your recommendation

Forgive the obvious statement, but without evidence to demonstrate your thinking, a complaint is more likely to succeed. Despite this, inadequate explanation of a planner’s rationale is commonplace.

Often, the details that should be in the fact-find are in the planner’s head, and when we speak with them their logic stands up to scrutiny. Yet this won’t save you in the event of a complaint or investigation as there is no evidence of your rationale on the fact-find.

In addition to this, it could result in you paying paraplanners more as they charge you for the time it then took to chase you and gather much needed information. If you read last month’s newsletter you’ll know that, after providing training on using fact-finds more effectively, one client reduced their paraplanning costs by 25%. In addition to this, they have seen an increase in business.

3. Not discussing protection could result in an unwanted outcome

We regularly see fact-finds that state the client “does not want to discuss protection”, or that it is “not applicable”.

The financial services sector is littered with horror stories of financial planners paying the price of not highlighting and discussing protection adequately with clients, resulting in a complaint or investigation when that client unexpectedly dies.

As a financial professional there is an obligation on you to raise the lack of protection as an issue and, typically, to prioritise it over and above investments.

While many of your clients are likely to be resistant to protection, and categorically state they are not interested, failing to record that you discussed it in the fact-find could seriously harm your defence if you face a serious complaint.

4. Make sure you have considered the total charge of your recommendation

An issue that is becoming increasingly common is fees. This falls into two categories, the first being no signed agreement confirming that the client authorises the fees you’re charging. The second is failing to consider the combined total of your ongoing advice charge and product charges, when a recommendation to transfer a scheme is based on lower costs.

The FCA has pledged to start looking at defined contribution (DC) pension transfers more closely, and it’s likely to result in an alarmingly high proportion of “unsuitable” responses being returned. This issue of failing to consider the total charges could be one reason there is likely to be a high proportion of transfers rejected by the authority.

5. Provide detailed research to back up your rationale

Detailed research to back up your rationale and recommendation is vital. However, we regularly spend time chasing and contacting financial planners to discuss their research and to clarify key points.

Explaining a company’s AKG rating, it’s history and background, together with details on the product and its performance should be the minimum level of information you provide. It demonstrates you’ve been diligent and will help provide a robust defence against any complaint or investigation.

It’s not just about protection though. In the same way that soft facts can help you make better presentations, providing detailed research can help a client follow your rationale and demonstrates the levels of work you’ve done for them.

This will always help ensure a more successful presentation.


Get in touch

Working with us can provide peace of mind that your fact-finds and the systems you use will stand up to scrutiny in the event of a complaint. If you would like to discuss the potential cost savings and benefits of working with our experienced paraplanners, please contact us online or call on 01472 728 030.