Compliance

FCA Suitability Requirements for Financial Advisers

FCA suitability requirements require a firm to obtain enough information about the client to make a suitable personal recommendation, assess that information against the proposed product or service, and provide and retain the required record or suitability report. For advisers, the file should connect the client’s objectives, financial situation, knowledge and experience, risk tolerance and capacity for loss directly to the recommendation.

TakeNote TeamMarch 15, 202610 min read

Last reviewed: August 2026

Which FCA suitability rules apply to the advice?

COBS 9 and COBS 9A are separate suitability regimes. Which one applies depends on the business and product, so advisers should identify the correct chapter before assessing or documenting the recommendation.

The FCA's suitability requirements sit principally in COBS 9 and COBS 9A. COBS 9 applies to relevant non-MiFID business. COBS 9A applies to MiFID, equivalent third-country and optional exemption business, and contains rules relevant to certain insurance-based investment products. The chapters pursue similar outcomes but differ in scope and wording; they should not be quoted interchangeably.

Our detailed guide to COBS 9A requirements for financial advisers explains its information-gathering, assessment and reporting provisions. Firms should check the classification of the particular service and product when deciding which rule applies.

The Consumer Duty is also relevant to the way firms design, deliver, monitor and evidence retail customer outcomes. It applied to open products and services from 31 July 2023 and to closed products from 31 July 2024. It does not replace the COBS suitability rules or turn every useful file note into an express regulatory requirement.

What does an FCA suitability assessment need to establish?

A suitability assessment must be based on sufficient information about the client and must determine whether the recommendation is suitable for that client. The assessment should connect what is known about the client to the risks, features and purpose of the proposed product or service.

Under the applicable rules, the firm must obtain the information necessary to understand the client's investment objectives, financial situation, and knowledge and experience. The exact depth depends on the nature and extent of the service, the product and its risks, and the client's circumstances. Under COBS 9A.2, the assessment includes risk tolerance and the ability to bear losses.

If the firm cannot obtain the information necessary to assess suitability, the relevant rules restrict it from making the personal recommendation or taking the decision to trade. A completed form is therefore not the goal in itself: the information must be sufficiently complete, reliable and current to support the judgement made.

What should advisers document to evidence suitability?

A useful suitability record shows the chain from client facts to adviser judgement: what was established, what was recommended, why it fitted the client, and which material risks or disadvantages were explained. Not every evidential check below is a standalone rule, but together they make the reasoning reviewable.

The following is a practical file-quality checklist, not a claim that every item is an express requirement in every case. Its purpose is to help a reviewer understand the basis of the recommendation without reconstructing the advice from disconnected documents.

The client’s objectives, including purpose, amount and investment time horizon
Financial circumstances relevant to the recommendation, including income, expenditure, assets, liabilities and liquidity needs
Knowledge and experience relevant to the product or service being recommended
Attitude to risk and the discussion or evidence supporting the conclusion
Capacity for loss assessed separately from willingness to take risk
Relevant personal circumstances, including vulnerability where it affects the advice process or outcome
The recommendation and a client-specific explanation of why it is suitable
Material risks, costs, disadvantages and trade-offs explained to the client
Any material inconsistency in the information gathered and how it was resolved
The date, source evidence and version of the suitability report or other client communication

Recording alternatives considered can strengthen the rationale where a real choice was made, but it should not be presented as a universal standalone COBS requirement. Similarly, vulnerability should be documented where it is relevant to understanding the client, communicating effectively or avoiding foreseeable harm; the FCA's vulnerable customer guidance provides the primary framework.

How should risk and capacity for loss be documented?

Document attitude to risk and capacity for loss separately. Attitude to risk concerns the client's willingness to accept risk; capacity for loss concerns the financial effect a loss could have on the client and their objectives.

A questionnaire score can inform the adviser's assessment, but a number such as “6/10” does not explain the conclusion. The file should retain the relevant discussion, the client facts used, any inconsistency identified, and the adviser's reasoning—particularly where the recommendation or final risk assessment differs from a profiling-tool output.

A client may be comfortable with substantial investment volatility while lacking the financial ability to absorb a loss. Equally, a client may have significant financial capacity but prefer not to expose capital to that level of uncertainty. Treating one as a proxy for the other weakens the suitability reasoning. See our practical guide to documenting suitability, risk and capacity for loss.

What must a suitability report explain?

Where the applicable rules require a suitability report or statement, it should specify the recommendation and explain why it is suitable for the client. The explanation should be client-specific and address the relevant objectives, circumstances and disadvantages.

The exact reporting obligation depends on the applicable regime and transaction. Advisers should check the relevant provisions in COBS 9 and COBS 9A.3 rather than assuming one standard report applies to every recommendation.

A report should not merely repeat product features or state that a recommendation matches a risk band. It should explain why the recommendation meets this client's objectives and is suitable given their knowledge and experience, financial situation, risk tolerance and ability to bear losses. Where relevant, it should also draw attention to disadvantages, costs, restrictions or other material trade-offs.

Which documentation weaknesses make a suitability file harder to defend?

Files are harder to review when they record a conclusion without the evidence and reasoning behind it. The practical warning signs are generic rationale, missing contemporaneous facts, conflated risk assessments and no traceable link to source evidence.

These are practical review indicators rather than a claim about the FCA's most frequent findings. Their significance depends on the advice and applicable rule, but each can obscure how the suitability judgement was reached.

A risk score is recorded without the conversation, assumptions or financial facts behind it
The recommendation is described, but the client’s circumstances at the time of advice are not
Attitude to risk and capacity for loss are treated as the same assessment
The rationale could apply to any client in the same risk category rather than this individual client
Material disadvantages or conflicts between objectives are omitted from the explanation
The structured record cannot be traced back to contemporaneous meeting evidence or source documents

How long should suitability evidence be retained?

There is no single FCA retention period for every suitability record. The correct period depends on the business, product and applicable rule, and a firm may need to retain records longer for complaints, legal or compliance purposes.

The relevant record-keeping provisions include COBS 9.5, COBS 9A.4 and the wider organisational requirements in SYSC 9. Our guide to FCA record-keeping requirements for financial advisers explains how the periods vary and why firms should map each record type rather than apply one blanket number.

How does TakeNote support suitability evidence?

TakeNote helps advisers capture, structure, review and retain evidence generated during the advice process. It supports the record-keeping workflow; it does not make the suitability assessment or determine that advice complies with FCA requirements.

TakeNote can turn meeting evidence into a structured draft covering client objectives, circumstances, risk discussions and recommendation rationale, while retaining the underlying source material for review. Missing or unclear points can be identified before the adviser approves the record. The adviser and firm remain responsible for checking the evidence, exercising professional judgement and issuing any required suitability report.

Frequently asked questions about FCA suitability requirements

Which FCA rules apply to a suitability assessment?

The applicable chapter depends on the business and product. COBS 9 contains suitability rules for relevant non-MiFID business, while COBS 9A applies to MiFID, equivalent third-country and certain insurance-based investment business. Firms should identify the correct regime for the recommendation rather than treating the chapters as interchangeable.

What information must an adviser obtain to assess suitability?

The relevant rules require sufficient information about the client’s investment objectives, financial situation, and knowledge and experience. Under COBS 9A, investment objectives expressly include risk tolerance, while financial situation includes the ability to bear losses. The depth of information should be proportionate to the recommendation and sufficient to support a reasonable suitability assessment.

What is the difference between attitude to risk and capacity for loss?

Attitude to risk describes the client’s willingness to accept uncertainty and potential loss. Capacity for loss concerns whether the client could absorb a loss without unacceptable harm to their financial position or objectives. They should be assessed and documented separately because willingness to take risk does not establish an ability to bear loss.

When is a suitability report required?

The reporting requirement depends on the applicable FCA regime and the type of business. Where a suitability report or statement is required, it should explain the recommendation and why it is suitable for the client, including how it meets the client’s objectives and relevant personal circumstances. Firms should check the precise COBS 9 or COBS 9A rule for the transaction.

How should advisers document a suitability assessment?

The record should connect the client information gathered to the recommendation made. It should show the objectives, financial circumstances, relevant knowledge and experience, risk tolerance and ability to bear loss, then explain why the recommendation fits those facts and disclose relevant disadvantages or risks.

How long should suitability records be retained?

There is no single retention period for every advice file. The applicable period depends on the product, service and regulatory rule. Firms should map each record type to the relevant COBS, SYSC or other requirement and apply any longer period required by their complaints, legal or compliance framework.