Outsourced Paraplanning – Advice File Requirements
We understand paraplanning is not just about writing reports, it is about ensuring the whole advice file requirements are compliant and fit for purpose. We get that every file does not need to include every point below, however, by being methodical and process-driven we ensure every point is considered and completed if and when required.
For an advice file to be suitable, the following consideration is required:-
Sufficient ‘know your client’ information: A fact find, meeting notes, investment risk profiler, etc. It is not uncommon for the paraplanner to attend all meetings and complete these documents on behalf of the adviser (to allow the adviser to focus on the client, not a notepad!). If the paraplanner is not involved in the meeting they should still be able to gauge the advice requirements from the information on file. If not this is in deficit and needs upgrading before the ‘report’ is drafted.
Product/Investment Selection Research and Analysis: No financial advice to purchase a product can be given without evidence of its suitability being available. This may be from a central research point (see central research below) or from specific evidence on the file. This is normally a key element of the paraplanning function. Information regarding any selected product should also be on the file, such as quotes, illustrations, and key documents.
Product comparison: if an existing product/investment is to be switched as part of the recommendation then a full comparison needs to be undertaken and evidenced on file using the appropriate research tool.
Written Suitability: Once all of the above is on file a suitability letter can be prepared. There is much written about what should be in a suitability letter, although most of this is written as guidance, not strict rules. In essence, the letter should be compliant with COBS and also in a readable format. This should as short as possible but without missing out on any required information.
Central Research: As opposed to researching every product for every individual case it is easier to undertake product selection research at fixed points during the year and use this research to ensure the consistent selection of products/investments. Establishing ‘shortlists’ of acceptable products and reviewing these shortlists at specific times (every 6 months etc) is a key part of paraplanning. Writing this research into central proposition documents is further good practice.
File Suitability: This service is often outsourced to an independent ‘compliance’ firm to undertake a ‘post-event’ check. However, a robust paraplanning function should ensure a final formal ‘file check’ is done to ensure the file evidences the suitability of the financial advice been given.
Cash Flow Modelling/Ongoing Reviews: An often overlooked requirement is the ongoing servicing requirements (now formalised under MiFID II) and the need to update cash flow models. Robust paraplanning should include these on an ongoing basis.
Many financial advisers are comfortable doing some of the above tasks, a few do all of them personally. It is therefore important to understand that paraplanning is not some form of administration support it is providing the ‘alter ego’ of the financial adviser.
To understand if the Paraplanning Hub is a fit for your advice company or not, simply contact us at your convenience.