Minimum standard 5. Advice
Does our sales approach ensure suitable advice is given and clients fully understand the products they are buying, in particular, the risks involved?
Yes. We advise and make a recommendation for the client. We provide a product illustration, which shows the costs, features and benefits of the product to the client. We aim to sell products that are suitable to the needs, wishes and financial sophistication of our clients.
How are we able to demonstrate that our selling practices have embodied the spirit of TCF?
We conduct a ‘Know your client’ exercise to determine the client’s current situation, existing provisions, objectives, budget and attitude to investment risk. We conduct market research using our knowledge and a variety of software to find the most suitable product for the client. We are authorised and regulated by the Financial Services Authority (FSA).The Key Facts Documents that we disclose to clients will be of a high standard. We would change our practices if we discovered that clients might be disadvantaged. We endeavour to ensure that advice is responsible, appropriate and timely for the particular sale. We will disclose information to our clients in ways that comply with FSA rules and requirements.
Does our advisory process allow clients to consider our services and any advice provided before committing to transact?
Yes. We offer an initial meeting free of charge, during which the Initial Disclosure Document (containing our charges and terms) would be discussed.
To what extent do we deliver holistic financial planning in accordance with TCF?
We endeavour to ensure that the client’s needs, knowledge and attitude to risk have been adequately assessed and taken into account. We endeavour to ensure that due account has been taken of the profile of the client.
Gap Analysis for Minimum standard 5
Specific milestones to be achieved
By December 2008 we will be able to demonstrate that we are consistently ‘Treating Customers Fairly’.
How the findings are used
To amend our procedures so that we can test whether we are ‘Treating Customers Fairly’.
Date reviewed and updated
Ongoing
How we benchmark against the six consumer outcomes
By following our procedures we satisfy the consumer outcomes required.
Minimum standard 6. Sales Process
We have an appropriate sales process and we ensure that the sales force receive training so that they have a proper understanding of the process, and are able to deal with customers in the manner we require. Meeting the correct standard forms a key element of the training and competency regime. Advisers must be consistent in the sales process they follow. The minimum standards we expect from advisers are as follows:
Step 1: Pre-sale service standards/processes
Information disclosure before providing services: So that the client is reasonably able to understand the nature and risks of the service and of the specific products being offered and, consequently, to take decisions on an informed basis, we will:
Provide appropriate information in a comprehensible form to a client about:
Our firm and our services
Investments and proposed investment strategies; including appropriate guidance on and warnings of the risks associated with investments in those investments or in respect of particular investment strategies
Execution venues
Costs and associated charges
COBS 2.2.1
We will provide clients (in good time before the provision of business, in a durable medium or via a website) with: (i.e. on Terms of Business)
Our name, address and contact details.
The methods of communication to be used between us and the client.
Money Wise IFA Limited is authorised and regulated by the Financial Services Authority
The nature, frequency and timing of the reports on the performance of the service to be provided by us to the client.
The manner in which we will ensure fair treatment of the client should a material interest or conflict of interest arise.
COBS 6.1.4
Business card
The adviser delivers a business card to the client and directed them to relevant information such as our contact details.
IDD
We then issue the Key Facts about our Services / Initial Disclosure Document (IDD) / 'Menu' of charges / Terms of business document. This established our position regarding depolarisation, i.e. we are Independent Financial Advisers, how we are renumerated and our fee agreement. The client will need to check and sign this to confirm their understanding before any work is undertaken. Advisers talk customers through disclosure documents, rather than relying on them to read and digest them on their own.
We will keep our ‘menus’ up to date and keep a record of them for five years.
Fact-find
We have adequate and up to date Know Your Customer (KYC) information on Fact finds for all clients, especially those who have an ongoing relationship with us.
Comprehensive fact finds must be completed to enable the adviser to identify areas of need/priority; the customer's financial priorities; their objectives and what they expect to achieve from the product/investment portfolios; being asked about provision for premature death, disability, income in retirement.
We will obtain the necessary information regarding the client's relevant knowledge and experience, financial situation and investment objectives so as to enable us to make personal recommendations that are suitable for our clients.
Based on COBS 9.2.1
We must obtain the essential facts about the client and believe that the recommendation meets their objectives.
COBS 9.2.2
We ensure that the ‘know your customer’ requirements are properly covered. This enables us to ensure the suitability of the recommended product. To do this the adviser will introduce and communicate the need for the fact-find / ‘know your client’ process, in which the adviser will establish the client’s details, such as:
Personal details
Occupational details
Income details: The source and extent of his regular income
Outgoings: Regular financial commitments
Dependents details
Solicitors/accountants/bankers/doctors details
Client’s position regarding Occupation Pension Schemes
Assets: Liquid assets, investments and real property
Provisions/Policies
Liabilities
Affordability: It should be clear how this has been assessed and taken into consideration. Advisers must take into consideration, and have a detailed breakdown of income (including rental income and investment income) and expenditure and establish what total figure is reasonable for the client to afford.
Liquidity / Amounts available for investment/savings/premiums
Attitude to Investment Risk: The risk rating of the recommended product must be consistent with the client’s investment objectives and attitude to risk. Include the client’s preferences regarding risk taking and the client’s risk profile.
Attitude to risk (ATR) must be explored with clients using the ATR questionaire and we record the decision reached (i.e. Cautious, Balanced or Adventurous) on the Fact Find.
Client's knowledge and experience:
We must obtain information regarding :
The types of service, transaction and investment with which the client is familiar.
The nature, volume, frequency of the client's transactions in investments and the period over which they have been carried out.
The level of education, profession or relevant former profession of the client.
The client must have the necessary experience and knowledge in order to understand the risks involved in the recommendation.
Demands/Needs/Objectives/Priorities/Preferences: It should be clear how this has been assessed and must be clearly documented, including: The length of time for which the client wishes to hold the investment and the purposes of the investment.
The adviser will ensure that all relevant information to move to analysis stage is obtained, whether the advice is ‘Full’ or ‘Limited’. The client and adviser then sign the fact find. The adviser will then explain the on-going advice process / next steps for the next meeting.
Mortgage advisers collect sufficient information on a client's credit history. They will not rely entirely on a packager to conduct a credit search and come up with suitable recommendations.
Step 2: Sales process – Analysis and Preparation
The adviser go away and conduct research using software such as ExWeb and Synaptic, select a suitable product and provider, prepare an Illustration / Policy summary / Statement of Price, and obtain a Key Features Document from the selected product provider.
Step 3: Sales process – Presentation
At the next meeting the adviser will:
Reconfirm the renumeration procedure
Communicate the analysis process to the client
Re-check that "know your customer" information is still accurate
Re-confirm client’s Objectives & Priorities
Re-confirm client’s Affordability / Liquidity
Re-confirm client’s Attitude to Risk and link to fund selection
Confirm that fund selection matches client’s Attitude to Risk
Set agenda for what will and will not be discussed
Evidence of Research
We must show the client evidence of research as to how we have selected the funds, the provider and if applicable, the wrap provider.
When a conflict of interest arises we must inform the client of the manner in which we will ensure fair treatment of the client.
COBS 6.1.4 (8) (b)
We must disclose, in a research recommendation, all of our relationships and circumstances that may reasonably be expected to impair the objectivity of the research recommendation.
COBS 12.4.9 (1) (a)
Our research must disclose major shareholdings, any other significant financial interests, that exist between us on the one hand and the relevant issuer on the other hand, including shareholdings exceeding 5% of the total issued share capital:
(i) In the relevant issuer held by us
(ii) Of us held by the relevant issuer
COBS 12.4.10 (1) (a & b)
We must disclose the effective organisational and administrative arrangements we have set up for the prevention and avoidance of conflicts of interest with respect to research recommendations, including information barriers.
COBS 12.4.10 (2)
If a person working for us receives or purchases shares of the relevant issuer prior to a public offering of those shares, the price at which the shares were acquired and the date of acquisition must be disclosed in the research recommendation.
COBS 12.4.10 (3)
If lump sum investment is recommended, confirm that client is happy to invest for 5 or more years.
Explain the tax situation regarding the recommended product
Key Features Document
We must provide clients (A key features document, provided in good time before we carry on business, in a durable medium, may be sufficient) with a general description of the nature and risks of investments, which must:
Explain the nature of the investment
Explain the risks in sufficient detail to enable the client to take investment decisions on an informed basis
Explain leverage and its effects and the risk of losing the entire investment
Include the volatility of the price of investments
State any limitations on the available market for such investments
State that an investor might assume financial commitments and other additional obligations, including contingent liabilities, additional to the cost of acquiring the investment
Include any margin requirements or similar obligations, applicable to such investments
COBS 14.3.2
Illustration
We bring to the client's attention the importance of disclosure documents.
Provide the client with a KFD / KFI / Illustration (free of charge and in good time before we carry on the business) to that client, in a durable medium. (COBS 13.1.1 & 14.2.1).
Explain the client specific illustration in full. (We provide Interest-only mortgage clients with comparisons and costs of a repayment mortgage so that the client is aware of how much it would cost to convert at a later stage).
Disclose the actual amount of commission to the client (in cash terms) within five business days of the transaction. (Based on COBS 6.4.3)
Explain charges, particularly effect of deductions tables and Reduction in Yield statement
Deal with client questions / objections
Confirm client’s understanding of the contract
Application form: Complete relevant paperwork, e.g. Application form and DD mandate. We will collect sufficient information on a client's credit history. We will not rely entirely on a packager to conduct a credit search and come up with suitable recommendations.
Advise client to disclose full material facts on the application form
Explain business-processing system
Explain cooling off rights/Client's right to change their mind
Discuss nature/frequency of ongoing relationship
Obtain ID from client and complete Money Laundering forms
Explain that a Suitability Report with Appendix will follow
Ask client to sign the Last Page of the Suitability Report and return it to the adviser
Advise clients that the Policy documents will follow
Advise clients of the importance of reading the Policy Summary, and in particular the section of the policy summary on significant and unusual exclusions or limitations.
Step 4: Sales process - Suitability Report
We are entitled to rely on the information provided by clients if we believe it to be current, accurate and complete.
COBS 9.2.5
We will only make a personal recommendation to the client if we obtain the necessary information to assess suitability.
Based on COBS 9.2.6
We must provide a suitability report to a client if we recommend:
Starting, surrendering, buying, selling, suspending, converting, cancelling or transferring a pension or investment product.
Making income withdrawals
An annuity
A pension opt-out
A life policy
COBS 9.4.1 and COBS 9.4.2
The obligation to provide a suitability report does not apply if the recommendation is to:
Increase a regular premium to an existing contract, or:
Invest additional single premiums or single contributions to an existing product to which a single premium or single contribution has previously been paid
COBS 9.4.3
The suitability report must be in a durable medium, clear, accurate, comprehensible, available and accessible to the client.
COBS 9.4.7 and COBS 9.4.9
When we issue clients with a Suitability Report the following areas are covered:
Current situation
Dependants
Tax position
IHT position
Income / Expenditure changes foreseen
Existing provisions - A short summary to illustrate that the advice provided had taken these factors into account.
Advantages and disadvantages of cancelling existing plans
Aims & Objectives / Specify the demands and needs of the client (COBS 7.2.4)
Attitude to risk
Affordability / Liquidity
Basic features of the recommended product
Reason for specific product recommendation
Suitability: Why the recommendation is suitable having regard to the information provided by the client.
Alternatives considered
Reason for provider selection
Funds selected and how this fits in with clients risk profile
Tax implications for both the client and the product
Relevant risk warnings
Consequences/advantages/disadvantages of recommendation
Confirmation that the documentation, i.e. Illustration/KFD/commission disclosure was or will be issued.
Disclose the amount of commission we receive from the product provide
Charges imposed by the product provider
Evidence of the research we have carried out
Clients right to change their mind
Clients have a right to cancel any of the following contracts (cancellation period of 30 calendar days):
Life policy
Annuity
Personal pension / stakeholder
Pension transfer
Income withdrawals
Clients have a right to cancel any of the following contracts (cancellation period of 14 calendar days):
Unit in collective investment scheme (including within a wrapper)
Child trust fund
PEP transfer
Enterprise Investment Scheme
Deposits
Investments
Start of cancellation period
The cancellation period begins when the plan goes on risk, when the client is informed that the life policy is on risk, or when the client receives the contractual terms and conditions (whichever is the later)
COBS 15.2.3
Disclosing a right to cancel or withdraw
We must disclose to the client, in a durable medium, in good time before the client is bound by a contract:
The existence of the right to cancel or withdraw
Its duration
The conditions for exercising it including information on the amount that the consumer may be required to pay, and the consequences of not exercising it
Practical instructions for exercising it indicating the address to which the notification of cancellation or withdrawal should be sent.
COBS 15.2.5
If a client exercises his right to cancel he must notify us before the deadline expiry.
COBS 15.3.1
By exercising a right to cancel, the client withdraws from the contract and the contract is terminated.
COBS 15.4.1
Whether Full or Limited Advice was given
Other needs identified
Wills
Future reviews
Trusts
COBS 9.4.7 and COBS 9.4.9
Timing of Suitability Report
We must provide the suitability report to the client:
Life policy: Before the contract is concluded
PPP/Stakeholder: Within fourteen days of the contract concluding
Any other case: When or as soon as possible after the transaction is effected or executed
COBS 9.4.4
In the case of telephone selling of a life policy, when the only contact between a firm and its client before conclusion of a contract is by telephone, the suitability report must be provided immediately after the conclusion of the contract.
COBS 9.4.6
We ask the clients to sign the last page of Suitability Report to confirm their understanding of the recommendation.
Top ups / Variation of a policy
If we sell the variation of a life policy or personal pension scheme we must provide that client, in a durable medium with sufficient information about the variation (free of charge and in good time before we carry on the business) for the client to be able to understand the consequences of the variation (unless the policy or scheme is a SIPP).
SIPPs
If we personally recommend that a client hold a particular asset in a SIPP, we must provide that client with sufficient information (free of charge and in good time before we carry on the business) for the client to be able to make an informed decision about whether to buy or invest. COBS 14.2.3
When we provide a document, we must state clearly the identity of the product provider.
Based on COBS 14.2.4
Prospectus
If we provide a client with information about an investment that is the subject of a current offer to the public and a prospectus has been published, we must inform the client where that prospectus is made available to the public.
COBS 14.3.3
Investment composed of two or more different investments
Where the risks associated with an investment composed of two or more different investments are likely to be greater than the risks associated with any of the components, we must provide an adequate description of the components of that investment and the way in which its interaction increases the risks.
COBS 14.3.4
Step 5: Post sale customer service
The application forms are sent to our Administration Department for business processing and for sending to the provider and their underwriters. The admin department keep in contact with the provider and keep track of the processing. Their aim is to obtain a policy document or mortgage offer on behalf of the client. If the case is unusual or high risk then the Compliance Director will review the file documentation. We will establish dates for regular review meetings with the client, e.g. Annually or 6 monthly. We have the capacity to provide an efficient level of post-sales service to clients.
If a client has a particular expectation of us after the point of sale we will ask them to state this on the our Initial Disclosure Document to enable us to understand, manage and fulfil our customers expectations. We take a risk based approach to after-sales contact. Clients who are recommended more complex products are contacted more regularly.
Material changes
We must notify a client in good time, and in a durable medium, about any material changes that are relevant to the service that we provide.
COBS 14.3.10
Gap Analysis for Minimum standard 6
Specific milestones to be achieved
By December 2008 we will be able to demonstrate that we are consistently ‘Treating Customers Fairly’.
How the findings are used
To amend our procedures so that we can test whether we are ‘Treating Customers Fairly’.
Date reviewed and updated
Ongoing
How we benchmark against the six consumer outcomes
By following our procedures we satisfy the consumer outcomes required.
Minimum standard 7. Customer Service
We review mortgage contracts at the end of the incentive period.
We take a risk based approach taken to after-sales contact. Clients who were recommended more complex products are contacted more regularly.
If clients have an expectation of the standards of service that they might reasonably expect then we encourage clients to state what this is on the Initial Disclosure Document and we endeavour to abide by it.
