If a company covered by this chapter makes a personal recommendation in relation to a stakeholder product, it may choose to provide basic advice under the rules of section 9.6 of this chapter instead of the rules of the rest of this chapter. If the company makes a personal recommendation to a professional customer to take out a life insurance policy that is not an insurance-based investment product, this chapter applies, but only the rules that implemented the requirements of the IDD. See https://www.fca.org.uk/publication/finalised-guidance/fg21-3.pdf]. a) take reasonable steps to ensure that a personal recommendation or decision to act is suitable for the customer; and. a) ensure that any proposed life insurance is in accordance with the customer's insurance requirements and needs.
If a company does not obtain the necessary information to assess suitability, it must not make a personal recommendation to the customer or make a decision to act on their behalf. If this happens, the company should ensure that it receives written confirmation of the instructions. The firm should also bear in mind the client's best interests rule and any obligations it may have under the appropriateness rules when providing the various services (see ■COBS 10, Suitability (for non-advised services)) and■COBS 10A, Suitability (for non-advisory services) (MiFID and insurance-based investment products regulations)).
A promotion restriction does not affect a transaction where there has been no prior communication with the customer regarding the investment from the Company or a person associated with the Company. A business must provide a suitability report to a retail customer if the business makes a personal recommendation to the customer and the customer:. If a company makes a personal recommendation in relation to life insurance, it must provide the client with a suitability report.
If a firm makes a personal recommendation about a pension transfer or pension conversion, it must provide: client with a suitability report; and. unless the only protected benefit involved is a guaranteed annuity rate) a one-page summary on the front of the eligibility report.
Timing
Contents
Where a friendly society has made a personal recommendation for a small life policy in■COBS 9.2.9R(2), the suitability report must include, at a minimum, the information required by■COBS 9.4.7R(1) and (4 ). [Note: first and third.
Means of communication (life policies)
Additional content for income withdrawals
Additional content for pension transfers and conversions
A company must ensure that the details are modulated according to the complexity of the transaction or the proposed insurance contract and the type of client.
Record keeping and retention periods for suitability records
A Additional guidance for firms with insistent clients
Purpose
Who is an insistent client?
Information to be communicated to an insistent client
Acknowledgement from the insistent client
Further personal recommendations given to an insistent client
Record keeping
Special rules for giving basic advice on a stakeholder product
This section applies to a company providing basic advice that has chosen to comply with the rules in this section instead of the other rules in this chapter (see . ■COBS 9.1.2 R).
Range
Requirements on first contact
A firm will meet the requirements regarding its obligation to provide written information in the rules describing the breadth of advice. 2) (if not provided at the first contact) send the client basic advice the initial disclosure information (■COBS 9 Appendix 1) in a durable medium as soon as practicable after the completion of the first contact;. 3) (unless the relevant product is a deposit-based stakeholder product) if the contact is by spoken interaction, give the client the disclosure required by the rules on additional oral disclosure for firms providing limited advice (■COBS 6.2B .38R).
Sales process
Suitability of recommendations
Despite ■COBS 9.6.14R (2) a firm may provide the summary sheet (■COBS 9.6.14R (2)) as soon as practicable after the end of the contract if the client requires it, or the contract makes it concluded using a means of remote communication that does not enable the summary sheet to be secured in a durable medium before the conclusion of the contract, but only if the firm:.
Concluding the contract
Basic advice on stakeholder products: other issues
Records
Suitability (including Annex 1 basic advice) (other than MiFID
9Basic advice initial disclosure information
Suitability (including Annex 2 basic advice) (other than MiFID
9Sales processes for stakeholder products
After 5, the retail customer should be asked if he or she wants to continue and if not, the sales process should stop. If it appears that the retail customer is unlikely to be able to afford a stakeholder product, the sale must be terminated and the retail customer provided with an explanation together with a copy of the questions and answers completed up to that point. A retail customer should be assessed to determine other possible financial priorities - for example, does the retail customer require (a) insurance protection; (b) access to liquid cash to meet an emergency; or (c) to reduce existing debts.
If appropriate, the retail customer should be given a clear warning about the desirability of meeting these priorities before purchasing a stakeholder product. A stronger warning should be given about the desirability of addressing debt as a priority if it appears that the retail customer has significant debt, particularly if there is a strong indication that debt commitments may make any new commitments unaffordable in short term. . To this end a firm should consider using a threshold or indicator to decide whether a retail customer should be excluded on the basis of affordability.
Examples may include where the retail customer has (a) annual unsecured debt repayments that exceed 20% of gross annual income or (b) four or more active forms of unsecured debt or (c) has consistently reached its overdraft limit . If a company warns about the desirability of meeting other priorities before acquiring a stakeholder product, or about affordability, it should also encourage the retail customer to consider ending the sales process. A retail customer's savings and investment goals, including the period in which the retail customer wishes to save or invest, should be established, including whether the retail customer:. a) may need early access to some. or the entire amount saved or invested; or. b) want to save or invest with a view to re-.
If this information shows that the objective of the retail client is: a) to accumulate a specific amount. b) only save or invest for the. If a retail client is unwilling to accept any risk of reducing the capital value of an investment, CIS stakeholder products, linked life stakeholder products and stakeholder CTFs should generally not be recommended. However, a company can, if appropriate, explain the impact of inflation on long-term savings, especially in relation to pensions, and invite the retail client to consider their attitude to risk in the light of that explanation.
If a retail customer is willing to accept the risk of capital reduction in some circumstances but not others, the retail customer must be reminded of the other circumstances before a recommendation is made to acquire a CIS stakeholder product or a linked life stakeholder product. where he or she is not willing to assume risk for the capital. A stakeholder pension scheme should not be recommended, and. the retail customer should be advised to seek alternative or further advice if it appears that the retail customer:. a) has or will have access to an oc-. It may also be appropriate to inform the retail customer that other options may be more advantageous than buying a stakeholder pension scheme (e.g. joining an occupational pension scheme).