COBS 9A Explained for Financial Advisers

What is COBS 9A?

The chapter is titled Suitability (MiFID and insurance-based investment products provisions) and was introduced when MiFID II was implemented in the UK. It has four sections: application and purpose (9A.1), assessing suitability (9A.2), information to be provided to the client (9A.3), and record keeping and retention periods (9A.4).

A point of frequent confusion is worth settling immediately. COBS 9A is the MiFID chapter. COBS 9 is the chapter that applies other than to MiFID business and insurance-based investment products. Firms sometimes have this the wrong way round, which matters because the two chapters impose different record-keeping and reporting mechanics.

Who does COBS 9A apply to?

In practice this captures most UK advice firms recommending retail investment products, and it captures discretionary managers. The optional exemption limb is significant: firms that took the Article 3 exemption are still brought within materially equivalent obligations, so being outside full MiFID scope does not mean being outside COBS 9A.

Where a firm advises across product types, both chapters can apply to different parts of the same client relationship. A recommendation on a personal pension may sit under COBS 9 while a recommendation on a unit trust within the same meeting sits under COBS 9A. Firms that maintain a single documentation standard across both avoid having to decide, file by file, which evidential standard applied.

What information must an adviser obtain?

The rule derives from article 25(2) of MiFID and article 30(1) of the IDD. It resolves into three information domains, each of which must be separately established — a firm cannot infer one from another.

Investment objectives and risk tolerance

Objectives must be specific enough to test a recommendation against. “Growth” is not an objective; “replace approximately £18,000 of annual income from age 62, with the capital remaining accessible for a possible property purchase in five years” is. The second can be assessed for suitability. The first cannot, which means a file recording only the first cannot demonstrate that the assessment was performed.

Risk tolerance sits within the objectives domain and is the client's willingness to accept variability in outcome. It is a subjective preference, established through conversation and, usually, a profiling tool. The tool output is not the assessment — it is an input to it. Where the adviser's conclusion departs from the questionnaire score, the reasoning for that departure is the single most valuable thing in the file.

Financial situation and capacity for loss

Capacity for loss is objective: can this client absorb the loss without a material effect on their standard of living? It is derived from income, expenditure, assets and liabilities, not from what the client says they are comfortable with. A client may be entirely relaxed about risk and still have almost no capacity to bear it.

Conflating the two remains the most common suitability failing, and it is the failing most likely to convert into redress, because it is the one that produces unsuitable outcomes rather than merely thin documentation. The FCA suitability requirements guide covers the distinction and the evidence needed for each in more detail.

Knowledge and experience

The firm must establish that the client understands the nature and risks of what is being recommended. For a straightforward multi-asset fund recommended to an experienced investor this is quickly discharged. For anything with structural complexity — illiquidity, gearing, conditional returns, capital-at-risk features — the standard rises, and the file should show what was explained and what the client demonstrated back.

Knowledge and experience is not static. A client's familiarity in 2019 tells you little about their position now, particularly where cognitive decline or bereavement is a factor. Firms should treat the onboarding record as a starting point that requires refreshing, and the FCA's guidance on the fair treatment of vulnerable customers is directly relevant here.

Assessing suitability

This is where files most often fall short in a way that is difficult to remediate after the fact. The client data is present, the recommendation is present, but the reasoning connecting the two is absent or reduced to a template sentence. A reviewer cannot tell whether the adviser weighed the client's circumstances or simply applied the firm's default portfolio for that risk score.

COBS 9A.2.2G makes clear that a suitability assessment is not confined to the moment of a new recommendation. Where a firm has undertaken to provide a periodic assessment, the same standard applies to each subsequent review, and each review needs its own evidence rather than an implicit carry-forward of the original rationale.

Two elements deserve explicit treatment in the record because their absence is conspicuous: the alternatives that were considered and set aside, and the reason the recommendation is suitable for this client rather than for a client with this risk profile. The second is the distinction between a suitability assessment and a segmentation exercise.

Suitability reports and statements

For a retail client receiving investment advice, the report should explain why the recommendation is suitable for that client — not restate the product features. The FCA has been consistent that a report which describes what was recommended without explaining why it fits the client does not discharge the obligation.

A practical test: remove the client's name from the suitability report. If it could be sent to any client with a similar risk score without alteration, it is a product description rather than a suitability explanation.

Record keeping under COBS 9A.4

COBS 9A.4.2AR sets this out for MiFID business, and also requires a record of having told each advised client whether a periodic assessment of suitability will be provided. For insurance-based investment products, COBS 9A.4.3R and 9A.4.4R require the record to include the result of the assessment, the recommendation and accompanying statement, any changes to the assessment — in particular any change to the client's risk tolerance — and any changes to the underlying investment assets.

Retention is not a single period, and this catches firms out:

• MiFID business: at least five years, under SYSC 9.1.2R.
• Insurance-based investment products: at least five years under SYSC 9.1.2AR, but COBS 9A.4.3R requires retention for at least the duration of the client relationship. SYSC 9.1.2BG expressly directs firms to consider whether this means keeping records longer than five years.

For a client relationship spanning two decades, the second bullet is the operative one. A five-year deletion policy applied uniformly across all suitability records would breach COBS 9A.4.3R. Our FCA record-keeping requirements guide sets out the retention picture across the wider Handbook.

Practical evidence firms should retain

Beyond the minimum record set, the following materially improve a file's ability to withstand review — because they evidence the reasoning rather than only the outcome:

• The client's own words on objectives and time horizon, not a paraphrase.
• The capacity-for-loss calculation and its inputs, recorded separately from the risk profiling output.
• Where the adviser departed from a profiling tool score, the reason for the departure.
• Alternatives considered and why each was set aside.
• What was explained about risks, and what the client demonstrated they had understood.
• Whether vulnerability indicators were considered, including a positive record that none were identified.
• The date and time advice was given, and the version of the report issued.

How technology can support consistent documentation

The recurring problem in advice files is not usually adviser competence — it is variance. The same firm produces a thorough file and a thin one depending on who held the meeting and how busy that week was. Consistency is the thing that is hard to achieve manually, because it depends on every adviser remembering the same checklist under time pressure.

Structured capture addresses the variance directly. Where each required element has a defined field, a gap becomes visible at the point the record is created rather than during a file review two years later. Retaining the underlying meeting record alongside the structured summary also separates the two functions cleanly: the summary is the record, and the transcript is the evidence supporting it.

Two caveats are important and firms should be explicit about both. Automated summarisation does not perform the suitability assessment — the adviser forms and owns that judgement, and must review and approve the output before it becomes a record. And no tool guarantees regulatory compliance; it supports the process a firm operates. TakeNote is built on both assumptions, and how TakeNote supports FCA compliance processes sets out where the platform helps and where adviser judgement remains essential.

Frequently asked questions

Sources

• FCA Handbook, COBS 9A — Suitability (MiFID and insurance-based investment products provisions)
• FCA Handbook, COBS 9 — Suitability (other than MiFID and insurance-based investment products)
• FCA Handbook, SYSC 9.1 — General rules on record-keeping
• FCA — Consumer Duty

This article is general information for financial services professionals and is not legal or compliance advice. Firms should refer to the FCA Handbook and their own compliance function.