Getting suitability right: lessons from reviewing advice in practice

Suitability is the foundation of good financial advice. The Financial Conduct Authority’s (“FCA”) recent consultation, Simplifying the Pensions & Investment Advice Rules (CP26/10), proposes a more proportionate framework. This includes consolidating the suitability rules in COBS 9 and 9A, replacing “necessary” information with “sufficient” information, simplifying aspects of the risk assessment and moving from annual to periodic suitability reviews based on clients’ needs. The core expectation, however, remains unchanged: firms must be able to show that advice is right for the client.

Recent experience suggests that the real challenge is rarely intent or technical competence. More often, weaknesses arise where judgement is not clearly evidenced, oversight lacks depth, suitability reports do not clearly explain the rationale for the recommendation or ongoing advice processes do not adapt appropriately to changing client needs and levels of engagement.

We draw on our experience supporting firms in this sector to explore recurring themes in advice decision-making, governance and oversight, and the practical implications of CP26/10 for meeting Consumer Duty obligations.

Where suitability breaks down in practice

There are a number of areas where suitability assessments can be strengthened, both in substance and in the way they are documented. In many cases, the issue is not that relevant information has not been gathered, but that the link between the client’s circumstances, the adviser’s judgement and the final recommendation is not always made clear enough. Strengthening this connection is critical if firms are to demonstrate that advice is genuinely tailored to the client and delivers good customer outcomes.

Aligning risk, investment strategy and client needs

A recurring theme is not that advisers failed to gather information, but that they did not always use it effectively to shape and evidence the advice given.

• Risk and investment strategy: a common area of improvement is the translation of a client’s attitude to risk into an appropriate investment strategy. Suitability should not rest on a questionnaire score alone. Firms need to show how attitude to risk, ability to bear loss, client objectives and other relevant circumstances were weighed together to support the recommended level of risk. Where relevant factors point in different directions, the adviser’s reasoning should be clear and proportionate to the nature of the advice being given.
• Time horizon: time horizon is another area where generic assumptions can undermine suitability. It should reflect the client’s actual objectives, expected access needs, cash-flow requirements and ability to remain invested. It should also be revisited when circumstances change, including life stage, health, income needs or vulnerability. Without this, advice can remain anchored to assumptions that are no longer valid.
• Ongoing suitability: firms should define clearly how ongoing advice will operate, including when periodic reviews are appropriate considering clients’ needs and circumstances, and how material changes will be identified and acted on. They should also communicate clearly to clients the service they will receive, when advice may be revisited and how the firm will respond where clients become disengaged. Without this, advice can remain tied to outdated assumptions and drift away from the client’s current needs.

Across all three areas, the key issue is judgement. Firms should be able to evidence not just the information collected, but how it was assessed, applied and, where relevant, revisited over time to deliver good customer outcomes.

Governance and oversight

While individual advice decisions matter, our experience shows that outcomes are often shaped by broader systemic factors. Governance arrangements, monitoring activity and the support provided to advisers all influence the quality and consistency of advice.

• Oversight of adviser activity: firms should ensure oversight provides meaningful challenge. It should assess not only whether advice is appropriate at the point it is given, but also whether the firm’s ongoing advice model, review approach and treatment of disengaged clients operate as intended, rather than simply confirming that processes have been followed or documentation completed. Where monitoring lacks depth or consistency, poor practice can persist undetected, increasing the risk that poor client outcomes are not identified or addressed promptly.
• Quality assurance as a preventive tool: the scope and focus of quality assurance are critical. Reviews that focus mainly on completing mandatory fields are unlikely to identify deeper suitability issues. More effective quality assurance takes a thematic approach, challenges inconsistencies and feeds lessons back into adviser training and governance to help prevent future harm.

Firms should define clearly what proportionality means for their advice model, governance and review framework. Advisers need room to exercise judgement, but within a framework that supports consistent outcomes and clear suitability reporting. In our experience, that depends on practical guidance, effective controls and regular review of whether the approach remains appropriate.

Suitability through the lens of Consumer Duty

Many of the themes that emerge in suitability work map directly to the Consumer Duty, including products and services, consumer understanding, fair value and the firm’s approach to supporting clients throughout the advice journey.

• Product design: suitability depends in part on products and services being designed with a clear target market and purpose in mind. Where product design and advice are not aligned, there is a greater risk that recommendations will not meet client needs in practice.
• Fair value: suitability is integral to fair value. A product or service may not deliver fair value if it no longer reflects how the client understands, uses or benefits from it in practice. In our experience, firms should consider not only point-of-sale suitability, but also whether their ongoing advice service and charging model remain aligned to the client’s needs over time.
• Consumer understanding: clients should be able to understand clearly how advice relates to their circumstances. Where the rationale for a recommendation is unclear, this may reflect weaknesses in how it has been explained. If the link between a client’s needs, objectives and recommended strategy is not set out in a clear and accessible way, meaningful engagement is unlikely.
• Complaints and remediation: where suitability concerns lead to complaints, firms with a clear view of product intent, value and suitability are better placed to respond consistently and fairly. Well-reasoned advice decisions, supported by clear explanations, also make remediation more proportionate and easier to deliver with confidence.

Practical considerations for firms

Even under the FCA’s proposed simplifications, good advice is about more than compliance. It depends on clear, well-reasoned decisions that reflect clients’ needs and are revisited appropriately in line with the nature of the service being provided. Where attitude to risk, time horizon and investment strategy are aligned, firms are better placed to deliver advice that clients understand, value and trust.

We recommend firms focus on how suitability decisions are made, explained, challenged and revisited, where appropriate, are best placed to meet regulatory expectations and deliver good client outcomes over the long term.

Firms should consider the following:

• Whether suitability assessments show clear judgement and explain how client information has been weighed in reaching the advice decision.
• How attitude to risk, time horizon and investment strategy are revisited over time in a way that is appropriate to the client’s needs, the advice service provided and any changes in circumstances or vulnerability.
• Whether advisers are supported by current policies, training and oversight so that they can exercise discretion consistently and appropriately.
• How effective monitoring identifies misalignment between client profiles and portfolio positioning, and whether the firm’s approach to clients who become disengaged prompts timely and proportionate action.
• Whether quality assurance focuses on reasoning and outcomes, rather than process and documentation alone.
• How suitability processes support Consumer Duty outcomes, including consumer understanding, fair value and product design.
• Whether advice records and suitability reports are robust enough to explain the recommendation clearly and support complaint handling, remediation and regulatory scrutiny.

In summary, getting suitability right depends on clearly evidenced judgement, robust oversight and advice that evolves with client needs, helping firms meet regulatory expectations while consistently delivering good customer outcomes.

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We understand the complexity and sensitivity of these issues and offer a tailored suite of services to support firms at each stage of their advice review, remediation or broader regulatory response.

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