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Report from the Paraplanners Powwow Down South – 21 July 2015

22 July 2015

Professional Paraplanner editor Rob Kingsbury reports from yesterday’s Paraplanners Powwow Down South, held in the office of Seven Investment Management in London. Following the same Chatham House rules as the national Paraplanners Powwow, the mini-powwows adopt a round-table discussion format in which paraplanners can get together to talk about the practicalities of day-to-day paraplanning life.

Topics up for discussion at the event, voted for by attendees in advance, were report writing and review processes, with an open forum Q&A session to end the half-day event. Here we look at the report writing session.

Pictured (l-r): Paraplanner Powwow Down South organisers Dan Atkinson; John Redmond; Alan Gow; Nathan Fryer.

Report writing

Not unsurprisingly, discussion centred around the presentation made by FCA technical specialist Rory Percival at the IFP Paraplanning conference in May. There it was made clear that the FCA was keen to see shorter suitability reports and how that might be achieved.

While there was a general consensus that shorter suitability reports could make sense, there was a reluctance to cut familiar elements out of reports and a noted resistance from some networks and third party compliance companies to allow companies to do so.

In addition, shortening reports was seen as more difficult to achieve than it might seem. As one attendee said: “It can be hard to take out something that you’ve always put in.”

Nevertheless, it was clear the Regulator wanted to see report lengths reduced and it was suggested that the question to start from is: What does the client need to see and so what needs to be in the report?

In his speech at the conference Percival said COBS 9.4.7 required that three things needed to be in the report:

1. Demands and needs (ie, the client objectives)

2. Why it is suitable for that individual

3. The possible disadvantages (ie, the risks)

It was pointed out that this had been challenged by financial adviser and lecturer Richard Bishop in an article in which he drew attention to COBs 9.4.8, which states: “A firm should give the client such details as are appropriate according to the complexity of the transaction.” This he argued is a “cover-all-bases, get out clause” for the FCA, and it is the vagueness of that statement which, understandably, has lead to longer reports from adviser firms as they try to make sure they cover all the bases themselves.

The question posed was: “When Rory Percival says, we only need to put x,y,z into our reports, can we take him at his word?” Discussion around the table revealed that there remained the worry for firms that in 10 or 20 years time when the client finds the report at the back of a draw and they decide to make a claim, that the FOS will look at the short report as in some way inadequate?

“You’ve almost got to look more along the lines of how the FOS will interpret the rules rather than the FCA,” said one attendee. Further discussion revolved around the issue that while Rory Percival has made the point that, to date, he is not aware of any case where the FOS has taken a different position to that of the FCA, as separate entities there is no guarantee that the FOS will look at a report in the same way as the Regulator. One attendee put forward the notion that the correllation of views to date “may be because until now advisers have been putting everything into suitability reports.”

An interpretation from one attendee at the table of what Percival had said, was that a suitability report should be like a key facts document, covering certain primary elements. “If you’ve got a good file and good client communications, a lot of information can be included in emails and letters, meeting notes that you send to the client, (along the lines of this is what we discussed are you in agreement?) and the suitability report forms part of the advice process. This is how I interpret what the FCA is saying it is looking for; the FOS is doing the same thing except it is looking at the whole file.”

Another reason that reports have grown to be so long, it was suggested, was the idea that they should be standalone documents; in other words firms are using them as fallback documents. Some attendees said their firms still required them to put in details about the clients circumstances, such as their age, marriage status, number of children etc, while others had removed those completely. It was queried what a client who had been with a firm for several years, being served by the same adviser, and who would receive a suitability letter from the firm on an annual basis, must think of that firm when it writes telling them basic information about themselves. At what point does that become ridiculous to the client?