A key question for any T&C supervisor is this: do our advisers provide suitable advice to our clients? Most supervisors would say that they do – but if your advisers weren’t providing suitable advice, how would you know? One way to do so is to observe them and do some supervisor training.
In my world, the role of the T&C supervisor is twofold:
To achieve these two aims, we need to be clear about the FCA expects from us. In their review published in May 2017 (click here for the full report), they gave a clear steer about what is working, and what isn’t. Either way, if you act as a supervisor, this is essential reading.
First the good news. 91.3% of investment advice was found to be suitable. This is a huge increase on previous reviews and a credit to the increasing standards we see across the profession. It’s still not perfect, but it’s pretty good.
The less good news is that 4.3% of advice was deemed ‘unsuitable’. There were also some concerns around disclosure. The FCA defined this as being the firm’s initial disclosure, the product disclosure and the disclosure in the suitability report. Here, 41.7% of cases showed that the FCA COBS disclosure requirements hadn’t been met.
The main areas to be addressed by supervisor training relate to the disclosure of fees – both initial and ongoing fees. Then there were fee-charging structures that are so broad, they are almost meaningless. Firms that charge advice on an hourly basis were also failing to provide an overall indicative cost for it.
The points I’ve just made are all likely to have a negative impact on one or more of the following: the client relationship, the quality of the information collected, the adviser’s ability to demonstrate how the advice meets the client’s needs, and/or the range of client priorities that are identified. At a time when the FCA is talking more about advisers providing ‘value for money’, these are all important factors.
So to finish. If we go back to the FCA findings, we’re clearly getting better at documenting the advice our financial advisers give. The most effective way to counter this is supervisor training that focuses on observing advisers to monitor and develop the broader areas we’ve discussed. A more ‘client-first’ approach is the foundation to any long-term effective and mutually beneficial client relationship.