Glossary · UK
What is Suitability Report?
A document a regulated financial adviser must provide setting out a personal recommendation, the reasons for it, and how it meets the client's needs and objectives.
Full Definition
A suitability report is a formal document that a Financial Conduct Authority-regulated adviser must provide to a client whenever they make a personal recommendation -- for example, to invest in a particular fund, transfer a pension, or take out a specific mortgage or protection product -- setting out the recommendation itself, the reasons it is considered suitable for that client, and how it takes account of the client's needs, objectives, attitude to risk and capacity for loss as established during the earlier fact find. The report must be provided in good time before, or in some cases immediately after, the client commits to the recommended product or transaction, and typically covers the costs and charges involved, the risks of the recommended course of action, any relevant alternatives considered and why they were not recommended instead, and any potential disadvantages, such as exit penalties on an existing product being replaced. Because the suitability report creates a documented, evidenced link between the client's stated circumstances and the specific advice given, it is central to how the Financial Ombudsman Service and the regulator assess complaints about whether advice was appropriate, and a poorly reasoned or generic suitability report -- one that does not clearly explain why the specific recommendation, rather than any other option, suits that particular client -- is a common finding in successful mis-selling complaints. Clients are generally encouraged to read their suitability report carefully rather than filing it away unread, since it should clearly explain in plain language why a recommendation has been made, what it will cost, and what the main risks and alternatives were, giving the client a genuine opportunity to question or challenge the advice before proceeding.