Terence has over 35 years' experience in the Financial Services environment, covering general insurance, investments and mortgages.
In the post Insurance Distribution Directive (IDD) implementation era, I thought it would be useful to look at two new terms which have entered the regulatory dictionary, namely the Fair and Personal Analysis and the Personal Recommendation.
Whilst the use of the word ‘personal’ is now enshrined in the FCA Handbook, it has been used in a regulatory context since general insurance regulation came in on 14 January 2005.
I recall a lot of confusion about what personal meant. At the time, I was Compliance Manager for a large general insurance broker and many of the staff expressed some fear about using the word personal in case they (personally) were sued for something which went awry.
We were able to reassure them that in this context, it was the regulated legal entity (i.e. the broking firm) which made the recommendation, not the individual staff member, so all calmed down.
Now we face similar questions.
Is it me, the account handler/executive that is making the personal recommendation and am I the one doing an analysis personally?
Let us all rest easy.
In this context, the FCA mean the following:
Here, the FCA mean that when you make a recommendation to any client, it is a recommendation to take a particular course of action - perhaps buy a specific type of insurance cover.
This recommendation is presented by the regulated firm as suitable for the person to whom it is made and is based on a consideration of the circumstances of that person.
In other words, after having established what the client needs to suit their personal circumstances (their demands and needs), you have put forward a proposition (recommendation) which meets those personal needs.
Therefore, the recommendation suits the client personally.
Fair and Personal Analysis
We are all comfortable with the concept of a ‘Fair Analysis’ - the addition of ‘and Personal’ is the issue. So, in this context, the FCA link this with the personal recommendation we looked at above.
To get to the personal recommendation or course of action proposed, you must undertake an exercise to check what is available in the market which may suit the personal circumstances of the client, so any analysis you undertake must consider their personal needs. Your analysis is then built around this.
I think you will agree that this is not too far removed from what the good insurance broker has always done and builds on having the customer’s best interests at heart.
However, it is important that the client understands what you have done and the FCA will require you to use the phrases ‘Personal Recommendation’ and a ‘Fair and Personal Analysis’ in your communications with clients.
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