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Financial Ombudsman’s viewpoint on suitability report writing

Outreach officer for the Financial Services Ombudsman talked to suitability report issues at the PFS Purely Paraplanning conference

For more on the conference go to: What Rory Percival is saying is not fact’ says compliance director

Speaking at the Personal Finance Society’s Purely Paraplanning conference on Tuesday, Mel de Noronha, outreach officer for the Financial Services Ombudsman (FOS), stressed that he agreed with Rory Percival that for the consumer to be in an informed position suitability reports had to be engaging and accessible. “Engaging is a key word,” he said, “but what one person finds engaging may be different for another. When writing a suitability report there is no one-size-fits-all.”

De Noronha added that it was not possible to say that if certain elements were included in a suitability report that “a complaint would not be upheld against a firm”.

Providing some insight into how the FOS might work, de Noronha said that “objectives are very different for different people” and “different people will need different risk warnings depending on the level of their financial sophistication and understanding – tailor it to them.”

In the same way, he said, in his experience “every consumer expresses their complaint in a different way”. As a result, he stressed, “we look at each complaint and circumstance on an individual basis and whether the recommendation is suitable for the individual person.”

Responding to the accusation that the regulator and the ombudsman operate in an environment of retrospective regulation, de Noronha emphasised that the FOS “should be looking at what rules were relevant at the time the advice was given. We shouldn’t be applying modern standards to something that happened 15-20 years ago. If you think we are doing that with any case then you need to let us know.”

Similarly, he said if an adviser firm feels that when dealing with a complaint the adjudicator has missed a point, “then let us know… ultimately the adjudicator should be able to have a conversation with you about it. Pick up the phone or email them.”

Challenged from the floor on instances where the risks are explained and documented in the suitability report but in a later complaint insists the risks weren’t explained to them, de Noronha said the FOS is independent and will sit in the middle of both parties and make a call “on the balance of probability” which version of events was most likely to have happened.

Asked whether having the client sign the report to say they have read and understood it would help, he said: “Just because there is a signed piece of paper doesn’t mean we are going to go with that but it might make it more likely that we will. We would question the consumer on the report and that they had signed it and exactly what was said at the time.”

De Noronha concurred with fellow panelist SimplyBiz compliance director Gary Kershaw that the report is just part of the overall advice. “It’s the whole advice package you need to look at.”

As an example of where mistakes can be made, even when the suitability report is accurate and covers all the bases, he said: “If in a meeting you have a perfect suitability report in front of the client and the adviser then says something to the consumer that is not outlined in the report, how is the client going to view that? As a person you are more likely to listen to what the person in front of you is saying than what’s in the report.”

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