The Association of Professional Financial Advisers (APFA) has published a guidance paper for advisers on what constitutes best practice when trying to produce clear and concise suitability reports for clients.
According to APFA, "less is more" when it comes to disclosing information, therefore advisers should limit communications to what "is really important" for a consumer when considering the advice given.
The body suggested advisers should 'layer' the reports with the most important information included up-front, while less immediately relevant material is either put towards the end of the report or placed on a website.
The concept of layering was first explored by the regulator in its smarter communications work issued in October.
APFA said it had held discussions with both the regulator and Financial Ombudsman Service (FOS) about how the technique might work in practice prior to publishing its guidance.
"It is clear that a mountain of paperwork does not encourage clients to engage with their personal finances and make the right long-term financial decisions."
The most important elements of a suitability letter are the key aspects: needs and objectives; recommendation; and risks, APFA said.
The FCA had found in its supervisory work of advisers the rationale for particular recommendations were not always clear.
Advisers should always explain why they have made certain recommendations at the beginning of the report, APFA said.
Advisers should also include their client's demands and needs as a simple statement that reiterates what they have said, alongside things the adviser has identified they need.
The third element, highlighting the risks of a course of action, enables an adviser to explain what might go wrong so the client is making an informed choice.
"This combined with explaining why you are making a recommendation and the achievability of a client's goal is what protects your firm in the event of a complaint," APFA said.
However, while detailing recommendations and their risks is important, it is not necessary to talk about the products that weren't recommended or any objectives that weren't considered, according to APFA.
"It is not necessary to include ‘negative' paragraphs such as those explaining some of the other possible objectives which had not been identified as priorities in the fact-find e.g. inheritance tax planning, including a lengthy explanation of what constitutes inheritance tax planning.
"However, where a need is identified as relevant it should be addressed and made specific to the client," the report said.
Investment strategy and client agreements are also not needed as they merely repeat other reports and documents.
Finally, the areas of advice and planning an adviser intends to do for the client and the cost are unnecessary, unless the advice is very complex, then a summary table can be helpful for the client, according to APFA.
APFA said it still believes the current regulatory environment ran counter to the FCA's desire for more concise communication but that the profession had a role to play.
APFA senior policy adviser Caroline Escott said: "We welcomed the work that the FCA has been doing on smarter communications for consumers.
"The FCA has often said that it is possible to produce short suitability reports which still manage to communicate all the relevant information. Advisers told us they felt frustrated at the lack of specific guidance from the FCA in this area, which is why we decided to try to fill that gap with our guide."
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