The first outcome of the new Consumer Duty requires that products and services must “meet the needs, characteristics and objectives” of the target market – in other words, advisers need to ensure that any products or services that they recommend are suitable for the individual circumstance of the client.
This reinforces the overarching principle that firms ‘must act to deliver good client outcomes for retail customers’: by ensuring that only the most suitable products are recommended, advisers can avoid foreseeable harm and provide clients with the best possible outcomes.
Of course, this is in addition to everything else that you do. To save you time, you can take advantage of FE CashCalc, an award-winning tool that streamlines the entire financial planning process.
The Product and Services Consumer Duty Outcome Requires Better Understanding of Your Customers
The first step in ensuring suitability is to build a clear understanding of your clients’ needs and characteristics, as well as their financial goals and objectives. This is essential information for establishing an inhouse ‘know your client’ process.
FE CashCalc’s onboarding functionality, FE Onboard, can help with this, whilst also supporting a robust and repeatable process that can be fully evidenced through a digital audit trail – ideal for ensuring compliance.
Here's how you can use FE Onboard to know your clients better.
Digital Fact Find
Gone are the days of manually re-keying pages and pages of hard-copy paper fact finds. Our digital fact find seamlessly integrates with your back-office and can be sent at the click of a button, making gathering essential information that much easier.
Whilst our fact find is designed to cover all of the necessary information, you’re able to modify and enter additional questions to gain a deeper understanding of your target market or individual client.
Gathering both accurate and detailed responses from the fact find is vital in making suitable recommendations. A digital fact find can help you in achieving this by providing clients with a format that they find both easier and more engaging, supporting them to provide a comprehensive and accurate background.
Open Banking
Clients can often underestimate their expenditure, hampering your ability to produce an accurate cashflow plan and therefore make the most suitable recommendations. Open banking within the fact find process can solve this, making it easy for clients to quickly import their income and expenses – providing a better experience for them and more accurate data for your planning.
Client objectives
Understanding your clients’ financial objectives is a key component of the Products and Services outcome to ensure that any recommendations are focussed on meeting their goals. The FE CashCalc digital fact find includes a specific ‘Objectives’ section, where clients can input their individual goals, as well as view smart insights based on the information they previously entered to suggest possible points for discussion.
Whilst initially these objectives may not be concrete, they are a vital foundation for detailed discussion, and you or your client can go in and build on them once clearer goals have been revealed. Having these written objectives not only helps you to target your recommendations with a goal in mind, but also enables you to clearly evidence to the regulator that you have considered them.
Attitude to Risk Questionnaire
Assessing your clients’ attitude to risk is essential in understanding their characteristics and therefore providing recommendations that are in line with their individual profiles. With our bespoke portal, it is easy to send a digital questionnaire to your client, or complete it together.
FE CashCalc’s built-in psychometric risk questionnaire is powered by EValue and designed to quickly evaluate the level of risk a client is willing to take, so that you can recommend suitable investments. Furthermore, by using a robust and validated questionnaire, you can be sure that you are compliant with FCA best practice whilst also having a clearly evidenced and thorough process.
Sustainable Investing Questionnaire
Similar to an Attitude to Risk questionnaire, our Sustainable Investing Questionnaire is specifically designed to help you gain an initial understanding of your client's attitude towards sustainability within their everyday life.
With increasing interest in ESG investments, it is crucial that advisers have the tools to uncover and understand each clients’ attitudes towards sustainability and subsequently make suitable recommendations.
Much like with the ATRQ, having a questionnaire format supports you in having a repeatable and clearly evidenced process, providing clear results that provide a strong foundation for further conversation.
Ensuring the suitability of your recommendations
Once you have gathered the necessary information from you clients, you then need to ensure and demonstrate that any recommendations you have made are suitable for the individual ‘needs, characteristics and objectives’ of the client.
Whilst ensuring suitability for your client is nothing new, the new rules demand a more thoroughly evidenced approach, requiring you to clearly demonstrate the suitability of your recommendations.
Net and gross cashflow modelling tools
Cashflow modelling is an invaluable tool in demonstrating both the suitability and value of your recommendations. With FE CashCalc’s visual timeline, you'll be able to map out and determine how your clients can achieve their financial and personal goals.
With FE CashCalc, you have the ability to create both net and gross cashflow plans – enabling you to create a comprehensive cashflow plan, whatever the requirements. This ensures that whatever your clients’ needs, you are equipped with the tools needed to provide the best possible outcomes.
Equally, our powerful visual models clearly demonstrate how the recommendations will help in achieving any financial goals, enabling you to easily evidence the suitability of your recommendations to both the client and the regulator.
Goals-based planning
Furthermore, our new ‘Meet a Goal’ tool allows you to quickly demonstrate if the current cashflow plan supports the client in meeting a specific goal – whether that be to not run out of money or reach a specific target.
If the current plan doesn’t directly support this goal, FE CashCalc will recommend how to achieve the goal through a chosen method: adjust the growth, injection of capital, or by adjusting the money in/out.
This tool directly supports you in recommending products that meet the objectives of your clients by determining whether the current plan is providing the best possible outcomes for your client’s individual goals.
Stress testing your recommendations
Another powerful way to ensure that the products you recommend are suitable for the needs and objectives of your clients is stress testing. Through thorough stress testing, you can demonstrate how you have considered risks that could affect your clients’ financial future, as well as avoiding foreseeable harm – both key requirements of the Consumer Duty Products and Services outcome.
FE CashCalc makes stress testing your recommendations as easy as ever – offering both stochastic and deterministic models that can be run in seconds. These powerful models allow you to make your client aware of worst case scenarios, as well as determine whether the investment is a suitable decision in regards to the client’s capacity for loss, directly supporting you in making the best recommendations for your clients.
Support positive client outcomes with FE CashCalc
FE CashCalc's digital onboarding features and cashflow planning tools enable you to uncover the most suitable recommendations for your clients' needs, supporting them in reaching their goals and achieving the best possible outcomes.
