Confirming Continued Suitability
The reason for paraplanners, including us outsourced paraplanners, is in essence, quite a simple one; to evidence suitable financial advice. Including playing a part in confirming continued suitability of the recommended plans and investments.
Financial Advisers are experts in getting to know the financial planning needs of individuals and coming up with robust financial plans, they are, on the whole, not so good at evidencing this advice on a file!
The purpose of this series of articles is to share the advantages of a paraplanner and financial adviser working in unison.
Dealing firstly with effective suitability letters:
All financial planning firms are now required to confirm continued suitability and need to give serious consideration to how their ongoing service propositions operate. Periodic assessment of suitability is detailed in COBS 9A.
“Firms providing investment advice must agree with a client whether a periodic assessment of suitability will be performed. If a periodic assessment is to be performed it must be at least annually and the continued suitability confirmed in writing.”
Most firms currently agree with the client whether ongoing reviews are required or not. Where ongoing service is to be provided, it is usually at least annually. Consequently, no fundamental changes of practice required by most if not all firms.
However, while firms probably provide written confirmation of any changes to be made to the client’s portfolio, it is less certain that there would always be written confirmation of the suitability of existing investments each time no changes or new investments are being made!
So, firms should note that there will need to be explicit confirmation of the suitability of existing investments each time a review is done and that such reviews must be at least annual.
The periodic report must contain an updated statement of how the existing investments meet the preferences, objectives and other characteristics of the client.
Although confirming continued suitability does not need to be War and Peace – a reference back to the original report and brief confirmation is all that is required – we do believe this is a great opportunity for financial planners to confirm their value.
The rules state: “Where an investment firm provides a service that involves periodic suitability assessments and reports, the subsequent reports after the initial service is established may only cover changes in the services or instruments involved and/or the circumstances of the client and may not need to repeat all the details of the first report.”