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Status: You are viewing the version of the handbook as on 2005-06-30.

SIFA 9.9 Suitability

SIFA 9.9.1G

The purpose of the Suitability section (COB 5.3) is that advisers take reasonable steps to ensure that any investment they recommend is suitable for the customer's requirements. The adviser must base his recommendation on information disclosed by the customer and on other relevant facts about the customer of which the adviser is, or reasonably should be, aware. It applies to all investments, but only in relation to advice given to private customers - not intermediate customers or market counterparties (see COB 5.3.5 R). You should refer to COB 5.3.1 R to check where section 5.3 applies.

SIFA 9.9.2G

An adviser may not recommend a packaged product if they are aware of another more suitable product that is generally available (see COB 5.3.9 R(1)). Nor may an adviser recommend the packaged product of a connected product provider unless that product is better than every other available packaged product (the 'Better than Best' rule see (COB 5.3.9 R(2)). To comply with these rules, an adviser is expected to have adequate knowledge of the products available from the market as a whole.

SIFA 9.9.3G

COB 5.3.29 G contains guidance for firms in assessing the suitability of personal pensions and FSAVCs (compared to stakeholder pensions and AVCs), broker funds, pension transfers and opt-outs, hybrid products, industrial assurance policies, income withdrawals, ISA or PEP transfers and contracting out of SERPS.

Suitability letters

SIFA 9.9.4G

When a private customer decides to act on the investment advice given, your firm is required to provide the customer with a written explanation of why it has concluded that the transaction is suitable. This is commonly referred to as a 'suitability letter', but need not necessarily take the form of a letter. However, whatever form it takes, it should explain simply and clearly why the recommendation is viewed as suitable having regard to the customer's personal and financial circumstances, needs and priorities, and attitude to risk. It is also essential that a member of staff who is authorised to advise on the type of product being recommended signs the 'suitability letter' and accepts responsibility for the advice. Detailed guidance on the contents of suitability letters can be found in COB 5.3.30 G.

SIFA 9.9.5G

The requirement for providing a suitability letter is explained in COB 5.3.14 R.

SIFA 9.9.6G

When you must provide a suitability letter is explained in COB 5.3.18 R.

Record keeping

SIFA 9.9.7G

Record keeping requirements for suitability letters are listed in COB 5.3.19A R.

SIFA 9.9.8G

The following section of this Overview is also relevant:

•'Know your customer' - Chapter 9.8.