Positive Outcome

No recommendation will be suitable if it does not create the opportunity for a positive outcome for the customer. There will be numerous examples, and hence the adviser must use his/her professional judgement.

Examples:

– A low value investment, say £25,000, where ongoing services are being recommended at a minimum ongoing adviser fee of £1,000 per annum, is unlikely to create a positive outcome unless investment returns are high (which may also require higher than acceptable investment risk).

– A higher value investment, say £250,000, attracts an initial adviser charge of 3% and the ongoing total expense ratio (TER) close to 3%, but the recommendation, albeit in line with the customer’s ATR, is for a low risk, cautious investment. Again, investment returns are likely to negate the cost of initial and ongoing charges, and hence a positive outcome is unlikely.

– A comparison undertaken when considering switching funds/investments shows that the target scheme has lower overall charges. However, other matters must be considered, such as the detrimental effect of any initial charge applied to the fund by the adviser, the remaining term of the investment, etc.

– The anticipated net return should exceed the net of tax return from an instant savings account.

Important Note

Advisers must consider the relevant merit and client perception arising from any ongoing service proposition. Any ongoing adviser fee must be considered in light of the need for an overall ‘positive outcome’ for the client, primarily in cash terms.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

About the Author

Director - Having joined us directly from university, David quickly developed into an indispensable member of the team. As our IT Director he is responsible for ATEB’s technology strategies, security systems and platforms. He has been at the forefront of the development of ATEB Suitability and instrumental in ensuring that the complex regulatory requirements are catered for in an interactive and intuitive fashion. He would be delighted to discuss its capabilities with you in more detail.

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