A look at keeping the reasoning behind a recommendation in the file, long after the suitability report has gone out.
Most advisers could find the suitability report for a client they advised six months ago without much trouble. Whether somebody else could pick up the whole file and work out why that recommendation was made at the time is a different matter.
The report explains the recommendation to the client. The reasoning behind it is often scattered across meeting notes, research, emails, cashflow modelling, fact-finds, provider information and conversations between the adviser and technical planner. The recommendation itself may be perfectly clear, but if the thinking isn’t captured while the advice is being constructed, somebody returning to the file later ends up piecing the story together from the finished report rather than seeing the decision as it was made. At the time, all of that context feels obvious. Six months on, it usually doesn’t.
That sits behind Tony’s fourth paper in our Advice, Evidence & Judgement series, which argues that a good advice file should preserve the decision as well as the final recommendation. As he puts it, six months later the firm shouldn’t have to invent the reason again. It should be able to produce the one that was actually used.
Could somebody else follow the decision?
A useful test is to imagine the original adviser isn’t available. Could another competent person look at the file and identify the important evidence, understand any tensions or uncertainty, see which alternatives were genuinely considered and follow the judgement that led to the recommendation? They don’t need every thought that went through the adviser’s head, just enough to understand the decision path.
In practice the questions are fairly simple. Which client facts actually mattered, and was there anything that didn’t fit neatly? Why was this option chosen, and was another serious option considered and rejected? What was challenged along the way, and who adopted and signed off the decision in the end?
Tony calls this the six-month test: take completed cases old enough for memory to have faded and ask somebody who wasn’t involved originally to reconstruct the decision from the file alone.
When the reasoning gets recorded
The paper makes a useful point about timing. If the rationale is only written once the suitability report is being drafted, there’s a risk the explanation is being built around a recommendation that has already been decided. That happens easily, because once you know the answer, a neat account of how you got there is simple to produce.
A stronger sequence is to pull the evidence together, identify anything that conflicts or remains uncertain, record the important judgement and resolve any challenges before the client-facing report explains the recommendation. None of that means pages of extra notes. A short working note that captures the main trade-off can be worth more than a huge file where nobody can tell which facts drove the advice.
Think about who inherits the client
You might remember today exactly why a recommendation made sense, but you may not be the person looking after that client in two years’ time. A colleague could inherit the relationship, a manager might need to review a group of similar cases, the client could query an old decision, or someone dealing with a complaint may need to know what was understood when the advice was given. The FCA’s review of ongoing advice services, which had firms looking back over several years of client records, is a reminder that files get read long after the advice was given. A well-built file makes that person’s job easier because the documents are there and so is the route from them to the decision.
Five cases is enough to learn something
This doesn’t need to become a big project. Take five older completed cases and give them to somebody suitably experienced who wasn’t involved at the time. Ask them to explain back what mattered, where the uncertainty was, why you recommended what you did, which alternative you seriously considered and what was challenged.
If they can answer without speaking to the adviser, the file is probably preserving the reasoning well. If they keep having to ask the adviser to fill gaps from memory, you’ve learnt where the reasoning is actually being kept.
