Suitability reports are in the ‘dark ages’ and need an urgent overhaul, one paraplanner has declared.
Alan Gow, founder of Argonaut Paraplanning, is appealing to adviser firms to now update the templates their paraplanners use to create suitability reports because he says they are often littered with jargon and full of unnecessary information.
He argues that this defeats the purpose of consumer duty, which is to make financial information easy to understand for the consumer.
Speaking to FT Adviser, Gow said: “One of the key points of consumer duty is ‘consumer understanding’ and I think suitability reports have not moved on enough and are stuck in the dark ages.
“A lot of a jargon gets used. They tend to include a lot of things that they do not need to include, so in terms of consumer understanding that information actually gets in the way of what we are trying to convey.
“I would like to see advice firms modernising their approach to suitability reports, cutting out the jargon and stuffy language and removing unnecessary content.
"The thing we are trying to achieve is that when this report lands on the client’s door mat or in their inbox that they don’t open it and lose the will to live before they’ve started.”
Suitability reports are often created by paraplanners on behalf of an adviser to explain their recommendations to their clients.
Gow said things that could easily be removed from a suitability report include irrelevant risk warnings, details about the client’s personal circumstance which they already know, and the basis of the advice being given such as full, focused, independent or restricted.
He added: “By putting things in suitability reports that don’t need to be there, it gets in the way.
“It’s all detracting from the real thing that we are trying to achieve which is saying to the client ‘What do you want to achieve, this is how I recommend you get there, this is why it works for you and these are the potential risks. And that’s it.”
He said part of the problem is that suitability reports are unnecessarily complicated when trying to explain simple issues, which may put clients off from reading them.
He said: “What we really want to do is put ourselves in the client’s shoes. If I was the client and I received a document that is 30-pages long and all it does is justify a switch of a pension to a different provider, then am I going to read that? We also need to take into account that not everybody can read and digest something of that length.”
Gow, who is a chartered financial planner and accredited paraplanner, said another part of the problem is red tape from compliance teams in many adviser firms.
