Common gaps in advice files, and the rules behind each one

An advice file can fail a review even when the advice was sound, because the file cannot show it. The adviser knew the client, discussed the risks and agreed the charges, but the evidence of that conversation never made it into the folder, or it sits in an email nobody filed.

This guide sets out the common gaps in advice files that a reviewer should look for first, and the rule each one connects to. We are not going to give you a league table of how often each gap occurs, because we know of no current published source for that. The FCA's Assessing Suitability Review, which published results across many firms, dates from 2017 and is now marked historical, so we cite it below only as background. Instead, each gap here is one that engages a specific requirement, which is the best reason to check for it.

Why common gaps in advice files matter

SYSC 9.1.1R requires "orderly records" of the firm's business "sufficient to enable the FCA to monitor the firm's compliance" (SYSC 9.1). For retail advice under COBS 9A, COBS 9A.4.2AR requires the firm to record "(a) the time and date on which the investment advice was provided; (b) the financial instrument that was recommended; and (c) the suitability report provided to the client" (COBS 9A.4).

So a gap is more than untidiness: without the evidence, the firm may struggle to show a rule was met, even where it was.

Gaps in knowing the client

Knowledge and experience recorded as a tick box

COBS 9A.2.6R says the information on knowledge and experience "must include, to the extent appropriate": "(1) the types of service, transaction and financial instrument with which the client is familiar; (2) the nature, volume, and frequency of the client's transactions in financial instruments and the period over which they have been carried out; and (3) the level of education, and profession or relevant former profession of the client" (COBS 9A.2). A single box marked "experienced" does not show any of that. Look for the detail behind the label.

Capacity for loss folded into attitude to risk

COBS 9A.2.1R requires the client's "financial situation including his ability to bear losses" and "investment objectives including his risk tolerance" (COBS 9A.2). These are different things. The FSA's FG11/05 found that "many fail to take appropriate account of their capacity for loss" (FG11/05). Check that capacity for loss has its own assessment and reasoning. Our guide to capacity for loss vs attitude to risk covers this in depth.

A risk tool used without explanation

FG11/05 said questionnaires often "use poor question and answer options, have over-sensitive scoring or attribute inappropriate weighting to answers", and that firms should use a tool only where its outputs are "appropriate and fit for purpose". COBS 9A.2.9R similarly requires tools used in the suitability assessment, such as risk profiling tools or tools to assess knowledge and experience, to be "fit-for-purpose" (COBS 9A.2). A file that contains a score but no record of how it was discussed, or challenged, leaves the reviewer guessing.

Information that has gone stale

COBS 9A.2.10R requires the firm to maintain "adequate and up-to-date information". COBS 9A.2.13R adds that if the necessary information is not obtained, the firm "must not recommend". An old fact find carried forward without a note of what was checked is a weak point worth checking in long-standing files.

Vulnerability noticed but not recorded

FG21/1 defines a vulnerable customer as "someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care" (FG21/1). If the meeting notes mention a bereavement or a health diagnosis but the file records no assessment or adjustment, that is a gap.

Gaps in the recommendation

COBS 9.4.7R requires the suitability report to "specify… the client's demands and needs", "explain why the firm has concluded that the recommended transaction is suitable" and "explain any possible disadvantages of the transaction for the client" (COBS 9.4). For COBS 9A business, COBS 9A.3.3R requires an outline of how the recommendation is suitable "with reference to… the investment term required… their knowledge and experience… their attitude to risk and capacity for loss" (COBS 9A.3).

The gaps to look for:

• Generic reasons. Product text that would fit any client, rather than reasons tied to this client's objectives.
• Disadvantages left out. Charges, loss of benefits, exit costs or added complexity not mentioned.
• No investment term. The recommendation is never linked to how long the money is invested.
• Loose ends from the fact find. An objective recorded in the fact find that the report never addresses.
• No proof of delivery. No record of when, or whether, the report was sent.

Gaps in charges and ongoing service

Charges and disclosure

Disclosure deserves particular care. The FCA's 2017 Assessing Suitability Review found 93.1% of the advice it assessed suitable, but disclosure was 52.9% acceptable and 41.7% unacceptable (FCA Assessing Suitability Review, 2017). That review is now marked historical, so treat it as background, not as a measure of today's market.

The rules to check against are in COBS 6.1A (COBS 6.1A):

• the charging structure disclosed "in good time before making the personal recommendation" (COBS 6.1A.17R), so look for a dated document that predates the report;
• the total adviser charge agreed with the client and disclosed in cash terms (COBS 6.1A.24R);
• where adviser charges are paid over time for an ongoing service, an "ongoing service for the provision of personal recommendations or related services", disclosed, with "a right to cancel the ongoing service… without penalty" (COBS 6.1A.22R).

Ongoing service evidence

Where the firm provides a periodic suitability assessment, COBS 9A.3.9R requires it to "review the suitability of the recommendations given at least annually" (COBS 9A.3). The FCA's review of ongoing advice lists as good practice "Appropriate record-keeping to make sure firms can evidence delivery of their services where provided" (FCA ongoing advice review).

Look for:

• a dated review for each year the client paid for one;
• a record of every contact attempt where the client did not respond;
• a note of whether the service is still right for clients who decline reviews over several years, since the FCA says firms should discuss "whether continuing with the service is still in their best interest";
• charges taken that match charges agreed.

Closing gaps without rewriting history

When you find a gap, the fix depends on what it is.

1. The evidence exists elsewhere. File the original document (the email, the signed agreement, the meeting notes) in the right place, unchanged.
2. The evidence never existed. Do not create a document that pretends otherwise. Add a dated file note explaining what is missing and what has been done now.
3. The gap raises a suitability question. Escalate it for senior review before anything else.
4. The same gap appears in several files. Treat it as a process problem: change the template or checklist, then check later files to see whether it worked.

For the full list of what a sound file contains, part by part, see our compliance file review checklist.

Finding gaps across every file

Gaps are easiest to find when someone is looking for a specific list, every time. Scrutineer reads every document in every subfolder of a client folder, including scanned paperwork, and produces a missing-document checklist and outstanding file actions for every client. Each finding names the FCA rule it engages, with the passage quoted, and separate rule packs cover new client files and annual review files. By our estimate it takes a review from half a day to minutes. Whether a gap matters, and what to do about it, remains your compliance team's call.

Frequently asked questions

What is the most important gap to look for in an advice file?

Anything that stops the file showing why the recommendation was suitable: the client's demands and needs, the reasons the recommendation suits them and its disadvantages, as COBS 9.4.7R requires. Those gaps go to the heart of the advice.

Can we add missing documents to a file after the event?

You can file an original document that was misplaced. You should never create or backdate a document to fill a gap. Add a dated file note explaining what was missing and what has been done.

Is the 2017 FCA suitability review still relevant?

It is marked historical, so it is not a measure of today's market. It remains a useful reminder that disclosure was the weaker area in that review, which is a good reason to check charges evidence carefully.

See how Scrutineer builds a missing-document checklist for every client, or book a twenty-minute demo with Adam Booth on Microsoft Teams, run live on a demo firm with nothing to prepare.