A clear understanding of how this can be achieved at the outset and then monitored should be an important part of the adviser’s due diligence review of the discretionary manager selected.
Marcus Brooks is director at Cornelian Asset Managers
REGULATOR’S VIEW
The FCA has published guidance on assessing suitability and establishing the risk a customer is willing to take. Firms should ensure:
• They have a robust process for assessing the risk a customer is willing and able to take, including assessing a customer’s capacity for loss and identifying customers that are best suited to placing their money in cash deposits because they are unwilling or unable to accept the risk or loss of capital;
• Tools, where used, are fit for purpose and any limitations recognised and mitigated;
• Any questions and answers that are used to establish the risk a customer is willing and able to take, and descriptions used to check this, are fair, clear and not misleading;
• They have a robust and flexible process for ensuring investment selections are suitable given all aspects of a customer’s investment objectives and their financial situation – including the risk they are willing and able to take – as well as their knowledge and experience;
• They understand the nature and risks of products or assets selected for customers;
• They engage customers in a suitability assessment process (including risk-profiling) which acts in the best interests of those customers.
