Common issues when completing a suitability report

Cheryl Hughes, Compliance Team Leader

We are keen to ensure that we provide all our advisers with the necessary support and guidance to help you with your client files.

I would like to share with you the most common missed paragraphs from the suitability reports and the solutions we have put together to help aid you in completing them.

Q. Do you have standard paragraphs to add to the suitability report covering positive election of Fees, additional borrowing and where a client declines protection?

A. On our members site we have now added a template covering the top 3 paragraphs that can now be added to your suitability report that are not currently produced by The Key. 

The most common missed sections of the suitability report

Number 1

The most common ‘missed’ section of a suitability report is not addressing ‘positive election of fees’:

Did you know that approximately 40% of all mortgage products are fee free and that the average fee payable for most lender product fees is £995.00?

We know that clients have different needs, but where your client(s) have positively elected to add the lenders arrangement fee to the loan you need to ensure that your clients are aware of the implication it can cause. You will need to advise that it would be more cost effective for your client to pay the fee upfront/completion. This situation needs to be addressed in your suitability report. Please take advantage of the paragraph to the right and include in your suitability report.

Solution

You have positively elected to add the product fee of £ (INSERT AMOUNT) to your loan because (INSERT REASON). You are aware that by doing so you will pay interest on this amount over the full term of the mortgage. By adding the fee to the loan your monthly payment will increase by £ (INSERT AMOUNT) per month. You have been made aware it would be more cost effective to pay off the fee on completion.

Number 2

The 2nd most common ‘missed’ section of a suitability report is not addressing ‘additional borrowing’:

Under MCD requirements and as part of The Right Mortgage advice process you have to consider other options.

Please take advantage of paragraph to the right and include in your suitability report.

Solution

We have discussed the following alternative finance options prior to considering further borrowing on the property:

  • Further advance from your existing lender
  • Second charge mortgage
  • A new first charge mortgage

I have recommended (CHOOSE ONE OF THE ABOVE OPTIONS) because (INSERT REASON and OTHERS).

Number 3

It is strongly suggested that you include the paragraph to the right in your suitability report where clients have declined your advice regarding protection services.

Solution

Protecting Your Mortgage – DECLINED

We have discussed having the appropriate measures in place to protect your mortgage, such as income protection, life insurance and critical illness. You have confirmed that this is not a priority need at this moment in time and you will contact me at a later date to discuss your protection needs further.

Why do you need evidence of buy to let rental income?

When disclosing rental income on an application you are expected to obtain evidence of this.  There are many alternatives that are acceptable to The Right Mortgage as follows:

  • Bank statement showing rental income received
  • Latest AST
  • Accounts/SA302s/Tax calculations 100% submitted/computations with associated overviews

Please be mindful that any secondary income must be evidenced on your client file.

This requirement has always been the case but we have now updated our advice process for clarity.

A polite reminder regarding GDPR

Following the introduction to GDPR and the new customer consent form and terms of business we are still seeing lots of customer preferences left blank.

This is a polite reminder that it is essential you obtain consent from your client(s) for both face to face and non-face to face sales before handling any of their information.

Face To Face Advice Process:

  • When following the face to face advice process for a mortgage or protection sale we expect to see a signed customer consent form attached to the product on The Key for each client. This includes your client giving their preferences “I consent to contacting me by ☒ post, ☐ phone, ☐ SMS or ☐ Email”. These preferences also need to be completed on the fact find on The Key under the ‘consent manager’.
  • You also need to attach a signed copy of the terms of business which can be signed by both clients.

Non- Face To Face Advice Process

  • When following the non-face to face advice process for a mortgage or protection sale we expect to see a copy of the customer consent and terms of business which were issued to the clients along with a copy of the email conversation where the documents were sent and the response from each of the client stating “I have read & understood the customer consent form and terms of business and agree to be bound by the terms”. You will need to ensure that your client preferences are completed on the fact find on The Key under the ‘consent manager’.
  • You will need to attach a signed copy of the fee agreement which can be completed by both clients and signed by either a wet or electronic signature.