Suitability Reports: What the FCA Expects and Where UK Firms Struggle
What the FCA requires under COBS 9, where firms get tripped up, and how the process works in practice for UK IFAs and paraplanners.
A suitability report is a written document explaining why a financial recommendation is appropriate for a specific client. Under FCA rules (COBS 9.4), firms must provide a suitability report to retail clients before, or as soon as reasonably practical after, a personal recommendation is made.
The suitability report is the most important compliance document in the advice process. If a client complaint goes to the Financial Ombudsman Service, or the FCA reviews a firm's advice files, the suitability report is the first document they examine.
What a suitability report must contain
The FCA does not mandate a specific template, but COBS 9.4.7R requires the report to specify the client's demands and needs, explain why the recommendation is suitable given the client's investment objectives, financial situation, and knowledge and experience, and describe any disadvantages of the recommended transaction.
In practice, a suitability report for a UK wealth management client covers the client's objectives and goals, their financial situation (income, assets, liabilities, expenditure), their attitude to risk and capacity for loss, the recommended course of action (products, funds, platforms, wrappers), why the recommendation meets the client's objectives, why the selected risk level is appropriate, the costs and charges involved, and any alternative options considered and reasons for not recommending them.
For a pension transfer, the report is longer and includes a Transfer Value Comparator (TVC) and an Appropriate Pension Transfer Analysis (APTA). For a defined benefit to defined contribution transfer, the additional requirements under COBS 19.1 add significant length and complexity.
How paraplanners write suitability reports
The typical workflow looks like this. The paraplanner receives the completed fact find from the adviser. They read through the client's circumstances, objectives, and risk profile. They research the recommended products, checking fund factsheets, platform charges, and tax implications. They then write the report, section by section, ensuring every recommendation links back to something in the fact find.
A straightforward suitability report for a lump sum ISA investment takes 2 to 4 hours to write. A complex pension consolidation report takes 6 to 10 hours. A DB transfer report takes 10 to 20 hours, depending on the number of schemes and the complexity of the client's situation.
The writing is not the hardest part. The hardest part is gathering the evidence. The paraplanner needs to pull together fund charges from provider factsheets, platform comparison data, risk ratings from Dynamic Planner or similar tools, and evidence of the client's stated objectives from the meeting transcript or fact find. All of this information sits in different places: the CRM, email attachments, provider portals, and shared drives.
Where firms get tripped up
Compliance file checks consistently flag the same issues in suitability reports.
The first is weak rationale. Saying "we recommend a balanced portfolio because the client has a balanced risk profile" is circular. The FCA expects specific reasoning: why this particular portfolio, with this specific asset allocation, at this risk level, meets this client's objectives, given their financial situation. The report needs to connect the dots between the client's circumstances and the recommendation, with evidence at each step.
The second is missing evidence for capacity for loss. Advisers assess attitude to risk with a questionnaire. The score goes in the file. Capacity for loss is different. Assessing capacity for loss requires calculating how much a client's portfolio would need to fall in value before affecting their ability to meet essential expenditure and commitments. Firms often state a conclusion ("the client has moderate capacity for loss") without showing the analysis behind the conclusion.
The third is charges comparison gaps. Consumer Duty requires firms to demonstrate value. If you recommend an actively managed fund over a passive alternative, you need to explain why the higher charges are justified for this client. If you recommend a particular platform, you need to show you considered alternatives and explain your selection.
The connection between suitability reports and fact finds
A suitability report is only as good as the fact find behind the report. Every claim in the suitability report should trace back to a data point in the fact find. The client's objectives should appear in both documents, in consistent language. The risk profile should match. The financial figures should agree.
When these documents contradict each other, the compliance risk is high. If the fact find records "cautious" risk tolerance but the suitability report recommends a "moderately adventurous" portfolio, the file will fail a compliance check. If the fact find records household income of £60,000 but the suitability report references £65,000, an auditor will question the accuracy of both documents.
Consistency between the fact find and the suitability report depends on shared data. If the paraplanner writes both documents from the same extracted, verified data set, consistency is automatic. If they re-key data from the meeting transcript into the fact find and then re-key again into the suitability report, errors multiply at each transfer.
Consumer Duty raised the bar
Since July 2023, the FCA's Consumer Duty has added four outcome tests to every suitability assessment: products and services (is the product designed to meet the needs of the target market?), price and value (does the client receive fair value for the charges they pay?), consumer understanding (does the client understand the recommendation and its risks?), and consumer support (does the client receive appropriate support throughout the product lifecycle?).
For suitability reports, Consumer Duty means the report must demonstrate, with evidence, how each of these four outcomes is met for this specific client. A generic template with boilerplate language no longer passes compliance review. The report needs to be personalised, evidenced, and specific.