Weighing the data 

You may have seen the article published today in FT Adviser, based upon the 'guidance' offered by the FOS on the risks posed by 'insistent clients', and how IFAs ought to handle these cases.  If you scroll down to the comments section, you can see my somewhat sceptical take on this one.

Based upon our own extensive experience of dealing with the FOS, on our Members' behalf, I think I can quite categorically say that the 'issue' (or the danger) has almost nothing to do with the length or brevity of suitability documentation, or with the explicitness or opacity of the client declarations on file.  It has everything to do with the way in which we (I am using a very broad collective 'we') go about sifting the data that is available for consideration, in order to arrive at some kind of decision.  It is our capacity to 'weigh' the information that is available, and then also interpolate reliably across the gaps, which is what makes the difference - so this is not about the FOS versus The Rest, but the rather bigger question of how we go about that process of evaluation.  The truth is that those who exercise regulatory authority over the rest of us rarely seem to exemplify a more robust discipline in this respect, and that is a continual source of risk and unwarranted cost for our profession.  However, there is very little justification for complacency, if you are a Financial Planner.

Over the last fifteen years of running ValidPath, I have noticed this dynamic between the quantity of information, and the more onerous business of the rational interpretation of the data playing out in various ways.  One comes across the IFA whose FactFind is, frankly, somewhat minimalist - confining itself to a rather narrow corpus of specific facts, from which conclusions seem to be extrapolated in a most speculative manner which, when challenged, collapses like a pricked balloon.  And then, at the other end of the extreme, one encounters a FactFind which reads like a kind of Victorian Almanac of Random Facts, out of which almost no objective conclusions are derived, and where the transactional advice proceeds on a trajectory known only to Tolkien.  Clearly, the 'Little Data' approach must necessarily lead to the Mills & Boon model of documented advice, whereas the mere reliance on tottering piles of information does not somehow transmute base metal to gold, when it comes to the suitability of advice.  Something more is needed.

From a compliance perspective, more data is better than less, but it is not the volume of the stuff which is the significant factor.  It is what you then do with it - and that requires the professional adviser to have in place disciplines which allow him or her to render the information available into a form which may be reliably interpreted.  In our opinion, such disciplines now almost inevitably must include proper cashflow forecasting, and for that reason we have standardised our network provision around CashCalc, which allows the most careful balancing of the key active factors within the financial planning process, including the forensic investigation of the impact of risk, through the use of stockmarket scenarios.  In our opinion, this kind of careful weighing of the client data - and the documented proof of such a process - is likely to provide a better justification of your advice, than virtually anything else.