This year I’m ‘celebrating’ my fifteenth year in the finance industry. During that time our industry has changed, evolved, come of age… and so have we.
Over the last couple of years I have been looking back at where we’ve come from, what the landscape looked like back then, how we worked and – relevant to most of us – how we’ve adapted the way that we communicate with our clients in light of these changes.
Irrespective of what roles we perform within the industry, all of us have to communicate in writing with our clients at some point or another.
One of the most tangible things that our client receives from us is the suitability report; the document that sums up where they are, where we understand they’re trying to get to and how we propose to get them there. This is a very important document and is often undervalued in its potency or potential.
Over the years I have had a bird’s eye view of this element of the financial planning practice; working with a number of very good financial planning practices throughout the UK. When it comes to writing client reports, many of us are self-taught and have learned this skill over several years. The FCA provides guidance on ‘good and bad’ practice and requirements for compliance content, but is not prescriptive about the format of report writing.
This provides an excellent opportunity for financial planning firms that like to be ‘creative’ with their reports, but it is also quite hard to know how to put together a good report if you’re either new to the industry, don’t feel confident about report writing, or perhaps just not that interested in this bit of the job.
So how do you construct a decent report?
Different people prefer different approaches, but as a professional report-writer I try to follow these basic principles:
1. Keep it simple and brief
Trust me on this, less is more when it comes to a suitability report. Clients normally want us to take the pain away from their financial situation. Providing them with a huge document containing pages of information and analysis that doesn’t need to be in the report (or at least in the main body of it) does not help us to achieve this objective. Some schools of thought suggest that the ideal suitability report should be no more than seven to ten pages. In practice this may be quite a difficult target for a lot of companies to achieve, but it does help to hold the client’s attention and make sure they don’t miss anything important.
2. Break down the advice and analysis into separate stages for complex cases
Many firms are now using a two-stage process; creating an initial ‘financial plan’ (an unregulated document which contains the current position, data analysis and high level observations and proposed strategy, but no specific product recommendations or compliance wording). This briefing document is then discussed with the client in order to determine the next steps they need to follow, and whether they wish to proceed. At that point, a second compliant suitability report is prepared that briefly summarises the initial financial planning report and deals specifically with the product recommendations and compliance details. Breaking it down into bite size chunks tends to be better received by clients and provides financial planning firms the opportunity to distinct clearly (and charge separately) between the initial review and implementation processes.
3. Make it interesting and reader friendly
Use accent colours to pick out tables, important words, numbers and headings. Don’t use neon colours and preferably use something other than grey. It helps to hold the reader’s attention and makes the document aesthetically more attractive. Simple and effective.
4. Use plain English and minimise the use of jargon
This isn’t a case of ‘dumbing down’; clearly the tone of the report should mirror your understanding of the client’s financial sophistication. However, some clients don’t like to admit if they don’t understand something properly. It is our responsibility to make sure they understand what we are recommending and we sometimes forget that everyday terminology for us is not the daily language of our clients. We may be clever at what we do, but the real skill is in turning something complicated into something our clients can easily understand.
5. Use diagrams to help explain complex strategies
Have you ever tried to explain the workings of a Discounted Gift Trust in plain English? It’s not easy, and in practice in a client meeting some people like to use a diagram to explain what money goes to what people at what time. Why not do this in your client report? Ultimately, the goal is that – in five years’ time – the client can pick up your report and immediately understand what you recommended to them, why you recommended it at the time, and how it works. I like to create diagrams via Microsoft PowerPoint, which I then copy and paste into the client report. It saves pages of explanation and – quite honestly – a picture is just easier to understand. Another alternative is to copy a diagram from the product provider’s PDF literature, using the Microsoft Snipping Tool (which is automatically built into modern versions of the Microsoft Windows software). If you’ve never used the Snipping Tool before then look it up on your computer and start using it – it’s one of the most useful, but little known, tools available to us.
6. Use appendices to summarise detailed product, provider or tax wrapper information
The goal here is to get as much superfluous detail out of the main body of the report as possible, whilst still providing sufficient information to the client. The main body of the report can then just be used to summarise the recommendations, the reasons why the recommendations are suitable for the client, the risk warnings and the costs and charges.
7. Keep details of your services and investment proposition out of the report
There are various benefits to creating a ‘glossy’ brochure that summarises your investment processes, your client proposition, research and due diligence processes and (where appropriate) the reasons why you work with your Wrap or investment partners of choice. Clearly the main benefit is that it keeps this (often quite wordy) detail out of the suitability report, but also has the advantage of enabling you to hand this information to the client well in advance of the suitability process – i.e. giving them up-front information about how you work and helping them to understand some of your company’s strategies at an earlier stage in the process. Just be careful to make sure you are clear about your independence and impartiality where relevant within these documents, and that client circumstances are always viewed impartially. These are tangible documents which don’t need to be expensive or time consuming to produce.
A combination of these things can help to deliver a compliant and client-friendly suitability process, can breathe new life into a suitability report template that may be tired and need updating, or help to support a new or revamped client proposition. Most importantly, your clients will really value and appreciate it; which at the end of the day is our main objective.