When is a suitability report suitable?

Do I need to write a suitability report for this? We’ve been asked this quite a bit recently, so here are our pointers for when a suitability report is needed.

The rules for when you need a suitability report

This extract from COBS (section 9.4) sets out the rules but in layman’s terms, if you make a recommendation that involves buying or selling units in a fund within a regulated product, a report is required.

This includes actions like:

  • Fund switches
  • Rebalancing a portfolio (unless it’s discretionary or to the original asset allocation and funds)
  • Taking one off withdrawals or starting regular withdrawals for the first time
  • Adjusting the rate of withdrawals taken
  • Paying additional money in (apart from regular contributions or automatic increases)
  • Bed & ISA

If the change has an impact on the client’s financial position, it indicates there’s been a change in their needs or objectives and you must show why the changes you are recommending are suitable. The amounts involved make no difference.

A suitability report is also required whenever a change is being made to an existing protection policy. This includes increasing the sum assured unless this is under an automatic indexation option.

It’s all in the timing

When should you share the suitability report with your client? MiFID II (Article 24) states that it must be provided to the client ahead of completion of the transaction. Basically, before your recommendations are implemented. This demonstrates that your clients are being treated fairly and have plenty of time to consider the advice and change their mind if they want to.

Our new ‘simple top ups and changes’ service helps with these cases. Our rigorous sense check and second opinion combined with a compliant report for each case means you’ll meet your suitability requirements. Get in touch if you’d like to find out more.