We’ve heard these mentioned a lot over the last couple of years, following the introduction of Mifid II.
However, any good adviser would have been carrying out annual reviews well before this. Mifid II just brought about some necessary tweaks to those reports, such as;
- Clearly assessing the suitability of previous advice given, and reconfirming this still remains suitable.
- Confirming costs the client has incurred over the last 12 months (ex-post costs).
Over time, thankfully, providers have worked on improving their systems and knowledge to ensure the latter is easier to achieve.
Which leaves you with the rest of the admin that comes with an Annual Suitability Report (ASR), multiply this by the number of clients you manage, and you’ve got yourself a bit of a headache to manage!
Where can time be saved you might ask?
Well, providers are required to issue an annual statement, providing the client with a current valuation, as well as a backdated valuation from one year prior. The statement will also cover off point two, and provide confirmation of all costs the client has incurred in the last 12 months. If you can time your annual reviews with the client around this then there’s half of the job done for you!
By doing this you’re not only saving time, but you’re making it simpler for the client. Preventing conflicting information, should you review the costs at a different point to the provider.
These reports can support you in one of two ways, you can either use the data within them to populate the ASR or provide it alongside. The latter being another time saver as the ASR will then purely need to assess and confirm that the plans remain suitable.
What should the ideal ASR process look like?
Having a refined process could be your saviour. What we’ll look at next is the ideal process for both you and your clients. If you have an in-house admin team, you’ll probably get some thanks from them as well!
First of all you want to look at your existing clients and establish when the provider managing their holdings will be issuing their annual statement. If you can time your annual review around this then that’s a step in the right direction. From there you can look at any non-Mifid plans the client may hold and get in touch with those providers to request the same information. This will ensure you have everything needed to assess the clients position FULLY.
There will need to be a common sense approach here, certainly if you happen to have say 100 clients all on the same platform which produces annual statements on a particular month (we know of a few who can only report for a certain period, whereas others have the capability to run off an ad-hoc annual statement whenever required). In these circumstances, I can’t imagine you’ll be able to squeeze in 100 reviews in one month! However, you can still utilise the platforms annual statement but providing this to the client and referring to the output within the ASR.
It would make sense not to review the costs again in great detail within the report (assuming it hasn’t been a great deal of time since the annual statement was produced), simply to be sure not to confuse the client, as mentioned previously.
Once you have the annual statement or the requested information to hand, it may be worth running some fund performance data, we tend to advise a FE Longscan is best to give an overview of performance and asset allocation. This will likely be particularly important (albeit slightly unpleasant to look at) in the current climate, as clients’ are very aware of the impact COVID has had on their investments.
An annual statement and performance analysis will be the perfect pack to present at a pre annual review meeting. This will give you the necessary data to discuss the clients holdings at a high level and will open up discussion to any changes they wish to make and/or any annual recommendations such as using allowances or rebalancing an existing strategy.
Once you’ve confirmed the client is happy to remain as they are, you can then pull together your ASR. Again, it’s up to you whether you summarise the ex-post costs within the report for clarification (not all providers produce this in a clear easily digestible format) or whether you simply refer to this as an addition to the ASR.
You’ll usually have an idea which of your clients are serial allowance utilisers! That pre annual review meeting will allow you to clarify their wishes. Any top-ups, portfolio rebalancing and bed & ISA instructions can be covered off within an ASR as part of the annual advice process. However, should the client wish to switch funds and/or provider completely then this must be treated as a brand new piece of advice and therefore would require a suitability report. Any plans which are being switched to a new provider, no longer require an ASR as they have essentially been assessed as ‘no longer suitable’. The clock essentially starts again for those plans and they should be factored into next year’s reviews.
At Para-Sols we’ve tackled a range of ASRs on behalf of our clients. We’ve experienced anything from a couple of wrappers on one platform to a client holding multiple products across a range of providers. Our admin team have developed a keen understanding of providers processes for ASRs, both on and off platform. They’ve pretty much seen it all! – So they know how best to obtain the necessary data.
Which is why our ASR service was a no brainer! Why not share that knowledge and experience with our wonderful clients and assist, where we can, with the whole process from start to finish. So, if you could do with a helping hand, why not drop us a line and we’d be happy to chat it through!