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 Suitability Letters 
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Joined: 17 Apr 2008 11:13
Posts: 142
Location: Norfolk
Post Suitability Letters
I have a question relating to Suitability Letters and when these should be issued to a client.

Should these be issued to the client A) as a summary of the advice given to the client prior (or at the same time) as completing the application forms of B) after the business has been written - i.e. a summary of what has taken place?

If "B)", how is the advice given to the client in the first place (other than at a meeting or on the phone) and how are you sure that this has been understood by the client if they have not received this comprehensive written summary of the advice and signed it to confirm they have understood it? If it should be given in another separate written report, is this not a waste of time doing 2 reports which will say much the same thing?

In my previous place it was always issued under option "A)", but where I am now, it is option "B)". Is one of these wrong, or does it not matter in the scheme of things, as long as it is issued in a timely manner (within 14 days of the application)?

Look forward to your comments out there. :?


11 Jul 2008 11:56
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Joined: 15 Apr 2008 08:17
Posts: 128
Post Re: Suitability Letters
This is a very interesting point. I have worked for companies who's compliance department have insisted that the client receives the suitability letter / report prior to the application form being signed and dated. I have to say I prefer this approach, as it ensures the client is fully aware of the advice given before proceeding.
That said, I have a few IFA's who give verbal advice and sign up the business at a meeting, and I then produce the reports to justify those recommendations after the application has been signed up and the business placed. This practice is acceptable to their compliance team.
I'm not sure whether there is an FSA rule on how this should be done, but it's clear that different companies work in different ways!


11 Jul 2008 12:52
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Joined: 24 Apr 2008 16:22
Posts: 196
Location: Manchester
Post Re: Suitability Letters
This link should provide some guidance, although i'm always wary of reading stuff like this in isolation,

http://fsahandbook.info/FSA/html/handbook/COBS/9/4


11 Jul 2008 13:09
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Joined: 15 Apr 2008 15:46
Posts: 22
Post Re: Suitability Letters
Before the contract is concluded is what I always work to.

Sometimes this can be before the application is completed, or more often, the advice is given verbally at a meeting and the application completed at the same meeting and then the advice confirmed in writing asap afterwards, or before the policy goes on risk

Its difficult to issue the SL before the meeting or before the app is completed, as things can change, and this then only necessitates another report/addendum. Or the client may decide not to go ahead and then all the report prep time is wasted :cry:


11 Jul 2008 14:13
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Joined: 11 Jul 2008 14:59
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Post Re: Suitability Letters
I worked for an IFA firm whose procedure it was to issue reports prior to sign up. What a nightmare! I looked after the three top producing IFAs - all remote workers, whose ideas of a timescale was to let me know the client's requirements a day before a meeting!! I now work for a different company and I write the reports after the application(s) have been submitted. As long as there isn't a huge gap between submission and report issuing, our Compliance Officer doesn't have an issue. After all, I can't image an IFA deciding not to write business because the Paraplanner is on holiday/off sick and therefore not able to write a report prior to signing up proposals!! Yes, IFAs could write their own reports, but that defeats the reason for having a Paraplanner doesn't it?! :roll:


11 Jul 2008 15:07
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Joined: 11 Jul 2008 15:01
Posts: 30
Post Re: Suitability Letters
I always use the general rule of before irrecovable action has taken place.

In other words before the client is in a position that cannot be rescinded i.e. before any cancellation notice has expired.

For investments the client must be aware that they may not get the full amount back if they change their minds (likewise on a pension transfer - the ceding scheme would not accept a transfer back in in most cases)... so before the application is send is a must in my view.


11 Jul 2008 15:13
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Joined: 01 May 2008 09:21
Posts: 54
Post Re: Suitability Letters
I much prefer pre-sale reports, but our compliance people say provided the report is issued within 5 working days for products with cancellation rights (and the appropriate risk warnings are given regarding cancellation) then there is no problem.


18 Jul 2008 13:19
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Joined: 17 Apr 2008 11:13
Posts: 142
Location: Norfolk
Post Re: Suitability Letters
Thanks for the replies – not such a silly question given the different approaches and opinions out there!

I personally prefer the pre-application approach and think this is safer and more watertight (with my “deputy compliance officer” head on), although as Helen and Cheryl point out, this could result in tight timescales having to be met for last minute meetings and wasted effort if the business does not go through as originally recommended, if at all. :cry:

Jeff.


18 Jul 2008 14:20
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Joined: 27 Mar 2008 03:29
Posts: 571
Location: Oxfordshire, UK
Post Re: Suitability Letters
95% of what we produce are 'pre-sale' reports which most of our IFA clients prefer.

_________________
Richard Allum
http://www.paraplanplus.co.uk


18 Jul 2008 15:02
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