The what and how of ongoing suitability
While so much time and effort is put into getting that initial advice right, what happens when a clients’ circumstances change? Can you be certain that advice is still suitable?
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The success of your business is built on the back of lasting client relationships. Give high-quality advice that helps your clients meet their goals, and they’ll trust you with their money for years to come. And while so much time and effort is put into getting that initial advice right, what happens when a clients’ circumstances change? Can you be certain that advice is still suitable?
Periodic reviews have been a bigger part of the regulatory landscape since MiFID II came into force back in 2018. It’s now a requirement to undertake a suitability review at least annually. So while the FCA has been temporarily tied up with Brexit and the initial Covid-19 response, we think it’s likely that they’ll start to explore this issue more once the dust has settled. Ultimately, if ongoing advice is left unchecked, it’s not only the client who suffers — you could face costly regulatory action and your reputation is at stake.
On the other hand, get it right and you’ll be safe in the knowledge that your risk in this area is properly managed. Better yet, you’ll benefit from helpful management information gleaned from periodic reviews. This insight should form part of the suite of conduct MI that you provide for your Board.
So, what should you be doing to put your best foot forward and get ongoing advice right?
1. Make it happen
When life gets busy, things like periodic reviews can slip by the wayside. On top of that, in recent years wealth management firms have widened their client base, so there’s more clients who need a periodic review in the first place.
Put the right processes in place to make sure a review actually happens, for every client. This includes ensuring clients are contacted in good time beforehand and having clear procedures to follow if they don’t engage with the review process. For example, consider whether you should continue to charge for ongoing advice if the client is no longer engaging and benefitting from it.
2. Discuss the right stuff
The content of the meeting should cover all bases and you’ll need to have confirmed and, where relevant, updated all the required information before giving advice. Areas that need to be considered include:
- Presenting the right disclosures and documents
- Revisiting the client’s objectives
- KYC information
- Risk profiling
- Updating the suitability report
Beyond that, you should also be paying attention to how you follow up with the client after the meeting, including issuing a copy of the suitability report if you haven’t already done so.
3. Check your work
While many firms have shifted their business models to focus more on ongoing advice, in our experience too many have been slow to integrate this into the business assurance model. Just like with new business, the FCA expects you to be able to show how the advice you’re giving is suitable. So, while you could be providing high-quality ongoing advice, where’s your evidence?
For many, this means ramping up your business assurance operations and checking more files, so think about how you can make your processes more efficient. For example, our unique tech tool means we can give you the option to review 100% of your files, with automated file checking that only flags the ones that are high risk. As a result, we dramatically reduce the time and money wasted on manual file reviews without compromising on quality and accuracy.
4. Partner with an independent expert
Hiring an external partner to scrutinise your processes gives you a more robust, better quality review informed by broad industry experience and insight. With independent challenge, free from the shackles of internal pressures, you’ll get ultimate confidence that your ongoing advice standards are up to scratch.
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