We have published our findings and suitability assessment template following our thematic review of the quality of advice when recommending investments held on platforms.

Platforms have emerged as a key feature of the investment landscape in recent years, and we anticipate more advisers will adopt platforms as they make the transition towards the RDR regime.

But as our review found, platforms can introduce risks into a business, resulting in firms giving advice that is unsuitable or not in their clients’ best interests. 

Firms must carefully consider the impact of platforms on their business and clients, and ensure systems and controls are updated appropriately.

In light of risks to clients and unacceptable practices we identified, platforms advice will form a supervisory priority in the future.  Where we find unsuitable advice and weak systems and controls, we will take tough regulatory action.

So, firms who currently use a platform, or who plan to introduce one, should read our report  and supporting material for further information.

Background

The review builds on earlier work on platforms, including our 2008 Feedback Statement ‘Platforms and more principles-based regulation - Feedback on DP07/2" which identified a number of key advice-related risks.

Key issues to consider when offering advice on platforms

Firms should satisfy themselves that their advice is suitable and in their clients’ best interests.  Our review looked at three key unsuitable outcomes: 

1. The client incurred additional costs without good reason:
   advisers need to consider all costs including the combined cost of funds, products, platform and advice (initial and ongoing).

2. Investments did not match the client’s attitude to risk (ATR):
   a recommendation must be suitable for the client given their ATR and personal and financial circumstances.  Advisers are also responsible for the advice when using financial planning tools provided by the platform.

3. The advice led to lost benefits/guarantees or a financial loss for switched investments without good reason:
   advisers must review existing investments in the light of the client’s circumstances, needs and objectives and only recommend a switch when it is the client’s best interest. There has to be clear benefits for the client, not the firm.

Systems and controls

Weak or inadequate systems and controls can result in poor advice.  Our review looked at six areas where firms may have failed to:

1. carry out adequate due diligence or align their platform(s) with the client base;
2. identify and manage conflicts of interest relating to the platform(s);
3. maintain and enhance advisers’ training and competence in line with new services/products available on platform;
4. employ processes around providing advice to ensure advisers acted in their clients’ best interests on platform-based investments and services;
5. offer whole of market advice when recommending packaged products through a platform; and
6. oversee advisers to ensure they acted in their clients’ best interests on platform-based investments and services.

For further details on any of these areas, including examples of good and poor practice, please see resources below.

Further information

In addition to the review’s findings we have published a number of resources relating to platforms.

Investments advice and platforms: Project findings[PDF]
Investment advice and platforms: Good and poor practice report[PDF]
One-minute guide – Platforms (wraps and fund supermarkets)
Factsheet - Platforms using fund supermarkets and wraps

FSA’s investment advice through platforms suitability and disclosure assessment template [Excel]
FSA’s investment advice through platforms suitability and disclosure assessment template [PDF]
Notes to using the template [PDF]

Please note that the suitability and disclosure assessment template and accompanying notes can be used to evaluate whether the advice given to clients to invest using a platform is suitable.  

To use the template you will need to save it to a local file and rename it.  When the dialogue box opens asking you whether you want to open or save it please open the file then save to a local folder as a renamed file.  You will then be able to use it to record your information.