Tag Archives: financial advice

FCA supervisor training

Supervisor training and advice suitability

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:

  1. to ensure that minimum regulatory standards are met, and
  2.  to improve either the quality or quantity of advice provided to clients.

FCA – Assessing suitability review – May 2017

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.

Supervisor training – what to focus on

  1. The explanation of costs is clearly still an issue across regulated firms. In the work I do, I also see advisers who always offer a discount on the standard fee tariff (did you know that these should be recorded on an exception report?). I also see advisers who do not believe that the service they provide is worth what they are asking the client to pay.
  2. Although the FCA review gives some reassurance as to the suitability of advice, i wonder if we are just getting better than we were at giving a product solution, and then justifying it to the client.  If i’m right, then many advisers are still focusing too much on product solutions, and too little on first establishing the needs of the client. This sounds like I’m being pedantic but to me, it’s quite significant. If we are to provide suitable advice, we need first to have a clear idea about what is really important to the client, what their priorities are, what they would like, when and how much, and what could stop them form achieving this? If advisers in your business are talking about investments, pensions or whatever within the first few minutes of meeting with a client, then their focus is very much on solutions and not on the client’s needs.

Summary

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.

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