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Have you ever wondered why so many advice files fail to cut the mustard and so many aren’t graded suitable? Most of the time it’s the fact find where the issues lie (paraplanners will probably attest to this), but is it the document itself that’s the root cause?

Completion of a fact find is not actually a regulatory requirement, but it’s the method that virtually all advice firms use to record KYC, which, as we’ve opined so often previously, is the foundation for evidencing advice suitability. So why are so many firms using a fact find that doesn’t do the job it was intended to so? And why are so many of them so poorly designed? Get this part of the process wrong and you’re already on shaky ground, but if you don’t insist that advisers obtain information in the first place, is it fair to criticise them when they don’t?

Why so many variations?

We see dozens of different fact finds and in some firms there are multiple versions. Some are at best, basic, but others are massive. Some are generated by back office systems, others are paper-based, but all are supposedly aimed at the same goal – gathering information about the client on which the advice will be based – yet time and time again they’re either poorly completed, contain gaps and contradictions, are inaccurate, or are simply not fit for purpose. Because they fundamentally don’t prompt the person completing them to ask for the relevant information.

Very often the documents themselves are old, many having been designed years ago and not updated since and in a high proportion of cases the format is either driven by data input to the back office, or the need for the compliance department to tick relevant boxes. There are rarely prompts to ask supplementary questions and more often than not client objectives are either tick box, where the priorities are what the adviser is intending to make recommendations upon, or a selection from a pre-defined list. Rarely are the client’s own words and the reasons why they sought advice in the first place recorded.

Completion of a fact find should really be simple if the adviser really does know their client (we regularly hear comments that the adviser has known the client for 20 years, but their files look like they met the client 20 minutes ago!). After all, it’s basically filling some boxes in and recording supporting notes, yet it’s amazing how difficult advisers find it to do this.

Paraplanners will be able to attest to the number of times they’ve wondered how on Earth they can produce a decent file/suitability report when they’re presented with an incoherent load of scribble, some ticked boxes and vague client objectives that tell them very little. We completely understand, but at the same time we have some sympathy with advisers too, because as mentioned above, the document they’re asked to complete is frequently just not up to the job.

Some of the documents have large spaces for notes to support each section, but when they’re submitted they frequently have just that, large spaces for notes!

Fact finds generated by back office systems are often poor too, fundamentally because they’re largely based on hard facts and many of them are huge, with sections that are either irrelevant to the case, or are so basic as to not gather properly salient information.

So in light of all this it’s easy to see why so many fact finds are poor. Few really drive the advice and focus on real client objectives and fewer still cover holistic advice, providing a focus on the client’s needs as well as their wants. We rarely see a fact find that actually spells out what the client wanted to discuss in the first place, so advisers will generally only complete what’s placed in front of them.

Some firms also produce fact finds for corporate and trust advice and these are frequently worse than the ones used to provide conventional advice.

When did you last update yours?

The requirement to prove you know your client isn’t something new - COBS 9.2 has been around for over 15 years – yet this critical area remains a major weakness in many firms.

With the implementation of Consumer Duty and a greater focus on client vulnerabilities, an apparent increase in the number of clients looking for ethical investments, more emphasis on establishing capacity for loss and the requirement to capture client objectives more accurately, it’s amazing how many firms still rely on fact find documents that simply don’t prompt the adviser to request this information, so it’s up to the report writer to be very creative in a lot of cases.

We see many fact finds that are version controlled and dated and frequently they’re more than ten years old, so it’s no wonder that firms struggle to evidence suitability.

Is your firm’s fact find up to the job? If not, maybe it’s time to do something about it.

Our view

The FCA is openly targeting firms that they haven’t had previous contact with and they usually start by asking for firms’ new business registers, then they request some files. And what is usually the first thing they look at on advice files? The fact find. It’s not rocket science, but firms are still getting into all sorts of trouble because their KYC is inadequate and they can’t evidence suitability of advice as a consequence.

If the fact find is weak you can join the dots to see where things invariably end up. We see it time and again, with advisers indignant that they know their clients intimately (many actually do), but their files so often indicate otherwise.

When it comes to reviews, how do advisers actually remember what their clients told them when the suite of KYC they posses is so lacking in detail? Wonder what the fact finds look like in the big firms that have hit the headlines recently for failing to deliver reviews? It won’t take a stretch of the imagination to figure out.

The primary product that firms retail is advice, but if they can’t get this bit right everything else will go to hell in a handcart. Yet so many still rely on fact finds that just don’t capture sufficient information. Firms review other documentation but completely overlook the tool that drives their entire advice process for some inexplicable reason.

It is said that the definition of insanity is repeatedly doing the same thing but expecting a different result. Is using an old fact find an example of this?

Action required by you

If you’re using an old and outdated fact find maybe it’s time to look at a new version. We’ve helped lots of firms redesign their KYC gathering mechanisms and get their record keeping into shape. We can also help out with training these new documents out, so if your firm needs an update please get in touch.