ZYC-AR-002 - AR Advice Standard and Suitability Assessment

This document sets out the standard we expect from our ARs when giving advice to professional clients.

The Firm’s advice standard requires that any recommendation made by an appointed representative to a professional client must be demonstrably suitable, proportionate and in the client’s best interests, taking into account the client’s professional status, objectives and constraints. Advice must be based on an informed assessment of both the client and the recommended investment, and must be capable of independent justification by reference to documented evidence.

In practice, the standard requires that:

Advice is only provided to correctly categorised professional clients, with confirmation that the client has the experience and knowledge to assess the risks of the recommendation and that reliance on professional status is reasonable in the circumstances.

The adviser has obtained and recorded sufficient information about the client’s investment objectives, investment horizon, risk tolerance and any relevant constraints to form a reasoned suitability assessment, recognising that the depth of information required is proportionate to the nature of a professional client.

The recommended fund is consistent with the client’s stated objectives and risk profile, including consideration of the fund’s strategy, underlying assets, liquidity, volatility, leverage (where applicable), and any distribution or investor-type restrictions.

The advice explains clearly why the recommendation is suitable for that client, including the key risks and limitations of the investment, and does not rely on promotional language or implied performance outcomes.

Any conflicts of interest are identified, disclosed where required, and managed so that they do not impair the quality or independence of the advice.

Records of the suitability assessment, rationale for the recommendation and communications with the client are sufficient to allow the Firm to review, challenge and, if necessary, evidence the basis of the advice to the FCA.

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Prescribed Suitability Assessment Template

(Professional Clients – Investment Funds)

1. Client Identification and Classification

• Client legal name

• Client type (e.g. MiFID professional per se / elective professional)

• Basis for professional client classification and confirmation it has been verified

• Confirmation that the client is permitted to receive investment advice

2. Client Investment Context

• Nature of the client’s business or role (e.g. adviser, wealth manager, discretionary manager)

• Intended use of the recommended fund (e.g. own account, model portfolio inclusion, advisory platform offering)

• Relevant regulatory or mandate constraints applicable to the client

3. Investment Objectives and Time Horizon

• Stated investment objectives relevant to the recommendation (e.g. growth, income, diversification, hedging)

• Intended investment time horizon

• Any relevant liquidity or redemption requirements

4. Risk Considerations

• Client’s risk tolerance as relevant to the recommendation (including volatility, drawdown tolerance, complexity)

• Capacity for loss (where relevant for a professional client)

• Confirmation that the client has the knowledge and experience to understand the key risks of the recommended fund

5. Product Assessment – Recommended Fund

• Fund name, structure and strategy

• Key risk characteristics (including market risk, liquidity, leverage, concentration, jurisdictional risks)

• Liquidity terms and alignment with client needs

• Any investor eligibility or distribution restrictions

• Summary of costs and charges relevant to the client

6. Suitability Rationale

• Clear explanation of why the fund is suitable for this client in light of:

  • the client’s objectives

  • risk tolerance and expertise

  • investment horizon and liquidity needs

• Explanation of how the fund fits within the client’s intended use (e.g. portfolio construction role)

7. Risks and Limitations Communicated

• Confirmation that material risks, limitations and uncertainties have been explained

• Confirmation that no guarantees or implied performance outcomes were presented

• Confirmation that communications were clear, fair and not misleading

8. Conflicts of Interest

• Identification of any actual or potential conflicts (including remuneration-related conflicts)

• How those conflicts were managed or mitigated

9. Adviser Declaration

• Adviser name and role (AR)

• Confirmation that the recommendation complies with the Firm’s advice standard

• Confirmation that the advice is suitable for the client based on the information obtained

• Date of advice

10. Supervisory Review (Firm Use)

• Risk rating of advice (low / medium / high)

• Reviewed by

• Review outcome (approved / remedial action required)

• Notes and follow-up actions