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Suitability Reports

COBS 9.4.10 requires that when a firm makes a recommendation about a drawdown pension, the purchase of short-term annuities or taking UFPLS payments, an explanation of the possible disadvantages to the client must be included in the suitability report. The report should also include the risk factors involved, which are specified as

  • the capital value of the fund may be eroded;
  • the investment returns may be less that those shown in the illustrations;
  • annuity or scheme pension rates may be at a worse level in the future;
  • the levels of income provided may not be sustainable; and
  • there may be tax

Question - Use Your Note Taker To Jot Down Ideas / Calculations

Which one of the following is not a risk warning that must be included in a suitability report, as set out in COBS 9.4.10?

a) Levels of income may be at a worse level in the future.

b) Capital value of the fund may be eroded.

c) There may be tax implications.

d) Investment returns may be less that those shown in the illustrations.

A)

The wording of the risk warning is ‘The levels of income provided may not be sustainable’.