SUITABILITY REPORT TEMPLATE
To help you create your own client suitability reports, we’ve created this template to help when you’re recommending Royal London as the preferred pension provider to your client.
If you need more specific information for your report about Royal London, we’ve also created the
Key messages for your suitability report template.
It’s important that within your suitability report you clearly explain to your client why you’re recommending your proposal and how it meets their financial goals and objectives. Within the FCA’s guidance about suitability reports, they also mention how the report should:
• provide a balanced view
• detail the costs and charges involved and
• highlight any potential penalties that may be linked to your recommendation.
If your client is already saving for their retirement, but as part of your proposal you’re recommending they cancel their existing plan and transfer their benefits to a new plan with Royal London, in addition to providing a like for like comparison, the FCA will also be checking to make sure that good and appropriate advice has been provided. To help with your advice process, we’ve highlighted below the following points which you’ll need to take into account when producing your suitability reports. We’ve also included some of the points highlighted by the FSA in their 2008/2009 Thematic review:
• Knowing your client – finding out what their financial needs and objectives are.
• Analysing their existing arrangements – reviewing their existing arrangements and identifying any shortfalls.
• Researching new plans – identifying suitable new plans and their benefits.
• Identifying suitable investment options – identifying their suggested attitude to risk and recommending suitable investment options.
• Carrying out regular reviews – regularly reviewing their circumstances and ensuring their investment options remain suitable.
It’s important that you produce your suitability report in line with your own compliance requirements and that if you’re advising any client to transfer their existing plan to a new provider, that you’re authorised to do so, it’s in their best interests and it meets the FCA rules.
Pension Portfolio [with Income Release/Self Investment Pension Plan] suitability report prepared for [Name of client]
The contents of this report and the recommendation was provided by [Insert name and address of financial adviser]
Date of initial meeting Date of follow up meeting Date of suitability report
Date service agreement signed
[Insert date] [Insert date] [Insert date] [Insert date]
CONTENTS OF THE SUITABILITY REPORT
1. Introduction and overview
2. Summary of your circumstances and objectives
• Attitude to risk
3. Pension switching - Your existing arrangements 4. Your recommendation
• Product recommendation
• Provider recommendation
• Other product considerations
5. Services and Remuneration
1. INTRODUCTION AND OVERVIEW
Within this section you’ll need to provide your client with background information about your meeting and this report. Here are some suggestions about what you may want to include:
• details about you and your business
• what their financial needs, objectives and their future goals are in planning for their retirement
• information about the importance of reading this report alongside any illustration and key features you’re providing
• details about any documentation you’re providing that outlines the services you’ll provide and their costs.
2. SUMMARY OF CIRCUMSTANCES AND OBJECTIVES
Within this section you’ll need to summarise their personal details that you discussed during your meeting.
Within the table below is a list of some of the details you may want to include, but depending on your clients circumstances you may need to include other information as well.
Client detailsName
Date of birth
Marital status
Number of children financially dependent
Occupation
Employment status
Tax status
Monthly income (net) / £
Monthly expenditure / £
State of health
Preferred retirement date
Preferred retirement income / £
Smoker
Within this part you’ll need to include details about the financial objectives you discussed with your client. Depending on their needs and objectives, here are some suggestions about what you may want to include:
[These points may be suitable for a Personal Pension plan]
• If they are not currently saving towards their retirement and they want to start.
• If they are already saving but from your discussions you’ve identified that they’re not saving enough to provide them with the amount of pension they’ve said they want when they retire. You may also want to include details about the amount of pension they want to receive when they retire.
• If they’ve had breaks within their working history and they’ve not built up enough National Insurance contributions to provide them with a full State Pension, they may want to pay into a separate personal pension plan.
• If they are already saving towards their retirement but have more than one plan which they want to consolidate into just one. This may be because:
• they want to reduce their plan charges
• their existing pension provider doesn’t provide them with the flexibility or the investment opportunities/performance they need
• they are not happy with the level of service they’re receiving from their current provider.
[These points may be suitable for an Income Release plan]
• If they are nearing their retirement age and they want to see what options are available to them or they want to take out a new plan that allows them flexibility over how they take their income.
• If they want to start taking an income from their plan and they want to choose the most appropriate way of doing so.
• If they are already retired and they want to release additional tax free cash/income from their plan to possibly pay for their child’s wedding, help with a deposit for a house or pay off the remainder of their mortgage.
• If they are already retired and are receiving an income/pension but they want to continue contributing to a plan or look at reducing any potential tax liability.
[These points may be suitable for a self investment plan]
• If they have outlined an interest in wanting to take an active role in choosing investments, why they may want to consider a Self Invested Personal Pension (SIPP) plan.
• If they are a company director and they want to incorporate their business premises within their pension plan.
Attitude to risk
Within this part you’ll need to include details about your client’s suggested attitude to risk. You may want to include information about how risk adverse they are and the length of time they have until they retire. You should base your recommendation upon investment options that are suitable for them and which does not expose them to an unnecessary level of risk.
Here are some suggestions about what information you may want to include:
• It’s important to explain to your client that the greater level of risk they take with their investment decisions, increases the chances of greater rewards as well as the possibility of greater losses.
• You’ll also need to point out to your client that their investments can go down as well as up and they may not get back the value of their original investment.
• If you’ve gone through a risk questionnaire with your client, you’ll need to discuss the outcome from this tool and ensure your client agrees with your recommendation and their suggested attitude to risk. If you’ve used our risk profiling questionnaire the following information may help you to define to your client what their suggested attitude to risk is:
Attitude to risk OutcomeVery cautious / Very cautious investors generally have very low levels of investment knowledge and rarely keep up to date with investment matters. They also like to know that their capital is safe rather than seeking high returns.
Cautious / Cautious investors have low levels of investment matters and are not really interested in keeping up to date with investment issues. They don’t really like to take risks and prefer to keep their money in the bank.
Moderate cautious / Moderately cautious investors typically have low to moderate levels of investment knowledge and they may keep up to date with investment issues. Generally, moderate cautious investors are uncomfortable taking risks with their investments.
Balanced / A balanced investor will generally have a moderate level of investment knowledge and they may pay some attention to investment matters. They may also be prepared to take some investment risk in order to meet their long-term goals.
Moderate adventurous / A moderate adventurous investor will have a high level of investment knowledge and will be a fairly experienced investor. They are also prepared to take some risk as they understand this is crucial in achieving long-term goals.
Adventurous / An adventurous investor will typically have a high level of investment knowledge and experience. They understand the need to take an element of risk to achieve their goals and are generally prepared to take risks with most of their available assets.
Very adventurous / A very adventurous investor will have a lot of knowledge and experience and will take a keen interest in investment matters. They’ll also be looking for the highest possible returns on their capital and are prepared to take a considerable amount of risk.
3. PENSION SWITCHING – EXISTING ARRANGEMENTS
If your client is already saving towards their retirement, within this section you’ll need to confirm what their existing pension plan details are. Here is an example of the type of information you may want to include:
Plan detailsProvider and type of pension plan
Pension plan number
Your contribution / £
Employer contribution / £
Frequency of contribution
Retirement age
Investment choice
Fund value / £
Transfer value / £
Projection values / Low / Medium / High
£ / £ / £
Plan charges
Management charge (%)
Policy fee (£ or %)
Allocation rate (%)
Bid/offer spread (%)
Fund switch charge (£ or %)
Penalties for making the plan paid up
Reduction in yield (%)
Plan benefits
Online functionality
Market value reduction free period
Tax-free cash entitlement
Guaranteed annuity rate
Guaranteed minimum pension
Stakeholder guarantee
Pension plan death benefits / £
Option to take retirement benefits directly from pension plan
If as part of their existing plan details you’ve looked into the past performance of their existing investment choice, you may want to complete these in the following table:
Pension plan investment choice / Percentage growthxx/xx/xxxx to
xx/xx/xxxx / xx/xx/xxxx to xx/xx/xxxx to xx/xx/xxxx to xx/xx/xxxx to xx/xx/xxxx xx/xx/xxxx xx/xx/xxxx xx/xx/xxxx
[Investment choice]
[Investment choice]
It’s important that you tell your client that any past performance is not an indication to any future investment performance.
Reasons for recommending a pension switch
If your client is looking to switch their existing pension plan, it’s important that your recommendation is in line with the FSAs approach for pension switching advice. To help you meet their criteria, we’ve provided links to their templates below:
• FSAs pension-switching advice suitability assessment template [Excel]
• FSAs pension-switching advice suitability assessment template [PDF]
• Notes to using the template [PDF]
Within this part of the section you’ll need to confirm to your client why you’re recommending they switch their existing plan. As part of this recommendation you may want to include some of the following points:
• If their existing pension provider is not providing them with the level of service they require, or their existing pension plan is not flexible and does not adapt to their changing circumstances and their financial needs.
• If they’re currently invested in an investment option that does not meet their suggested attitude to risk and they’ve suffered from poor investment performance.
• If they want to make additional or lump sum payments to their plan but their existing provider has closed the contract to new money.
• If in the event of their death, their existing pension providers scheme rules do not allow their plan to take advantage of the nominee and successor flexi-access drawdown,
• If they have a number of pension plans that have varying charges, and may have different retirement ages, and they would like to benefit from consolidating these into the one plan where there is only one plan charge which is lower and is more suitable to their circumstances.
• Your client is nearing their retirement age and is considering taking their retirement benefits and they want flexibility over how they take their benefits.
• The online functionality available on their existing plan is limited.
• They would like some flexibility around the level of income they’ll receive.
• Their existing plan does not allow them to withdraw an income directly from the plan.
• Their existing plan does not allow them to phase in their retirement options.
• If they would like to take more of an active role in their investments and would like to be able to choose from a wider range of investment funds that can be offered via self investments.
• If they’re a Company Director and they want to incorporate their business premises into their pension plan they may want a self investment offering.
Important points to consider when transferring an existing pension plan
If your clients are nearing their retirement age and they are starting to think about how they’ll take their retirement benefits it’s important they consider all of their options before they switch. You may want to include some of the following points within your report to your client: