“Show me six lines written by an honest man and I will find something within them with which to hang him” – Cardinal Richelieu

Once upon a time, there were financial advisers. They may not have been called exactly that – brokers was a favoured name at the time – but they gave advice on financial products all the same. And, by and large, they gave very good advice in the vast majority of cases. However, there were a few bad apples and people lost money as a result.

Then along came the 1980s and the rise of Regulation. No bad thing, of course. Consumers need to be protected from those bent on flouting the rules, and a whole industry does not want to be tarred by the actions of a tiny minority. There were a few anomalies, however. Regulation was carried out by the industry itself and was funded in such a way that it meant good advisers were footing the bills caused by the bad ones.

Roll forward a few years and Government decided that self-regulation wasn’t a good idea. Advisers now had to be policed by what started as the Personal Investment Authority, that subsequently morphed into the Financial Services Authority, and then the Financial Conduct Authority that we know and love today.

These changes went hand-in-hand with the shift from a rulebook to “principles based outcomes”. Put another way, advisers were told “…this is what we want to see happen but we won’t actually tell you how to get there and will only be in touch if we decide you haven’t done what we thought you should” (I paraphrase).

Cue the claim management companies. No longer was the issue whether someone had received good or bad advice; it was whether the process in giving the advice had been followed. And so began the inexorable expansion of the Suitability Report.

Up to January 2018, anyone taking financial advice had to receive a Suitability Report in a reasonable time after having purchased a financial product from a regulated adviser. From January 2018, the Suitability Report had to be issued before the product was purchased.

And as many of you know, these suitability Reports now extend to well over 40 pages excluding the Risk Assessment and Key Features Documents that are also routinely supplied.

The Suitability Report typically includes details of the client’s circumstances; their assets and liabilities; aspirations, need and objectives; experience; attitude to risk; capacity for loss; details of how the product suits all the above; recommended funds and how they fit in with attitude to risk; charges for advice; fund charges; details of other products that could have been considered but were discounted; ongoing risks; required reviews etc. And this is not a comprehensive list. Other areas can, and should, be included if relevant to the situation.

And for joint investors – husband and wife, typically – it is no longer acceptable to produce one Suitability Report. One each is required.

And now we have these monolithic documents that cover every conceivable aspect of the investment process, we are now being informed (via reports in the media) that increasing numbers of complaints are being upheld as the explanations for the advice are either too technical or are simply buried and haven’t sufficiently been brought to the customer’s attention.

The easy conclusion to reach is that Suitability Reports are no longer being used to demonstrate suitability of advice (for the actual advice is, for the most part, no longer the issue) but are simply there to demonstrate that process has been followed. But even that now appears to be insufficient.

It is hard to know where the industry will go next. That there will be future mis-selling inquiries is inevitable (final salary transfers are the most obvious issue currently) and these will bolster the claims management companies further in their efforts to squeeze the very last it can out of what is left of the advice industry.

And, in turn, that will lead to fewer advisers who, due to the vastly increased costs of doing business, will only be accessible to the already wealthy. Joe and Josephine Average will be reduced to buying products direct in the hope that they will do what they expect, but with no certainty that what they have got is suitable.

At this point, it is customary to give our contact details so we can tell you how we can help. This time, however, although the contact details are the same, 0333 241 3350 or email info@richmondhousecs.co.uk , we’d like to ask your opinion of what it is you want to see in a Suitability Report that we can use in future submissions to Government and regulators to improve the advice process for the most important link in the chain – you!

Peter Murphy Dip PFS