COBS 9 – Suitability (Including Basic Advice)
1. Chapter Summary
COBS 9 outlines the requirements firms must follow when giving personal recommendations or managing investments for retail clients, including those involving investment products, discretionary portfolio management, and workplace pensions. It sets out clear standards for suitability assessments, recommendation thresholds, and special treatment for insistent clients, putting client interests at the centre of advisory processes. This chapter is essential for maintaining consumer protection in advice-driven services and ensures firms act responsibly when influencing or controlling client investments.
2. Applicability
Applies to firms making personal recommendations to retail clients on designated investments, managing retail clients’ investments, or managing assets of workplace pension schemes (non-MiFID) . MiFID business and equivalent third-country activities rely on COBS 9A instead. Firms offering basic advice on stakeholder products have a tailored regime under COBS 9.6.
3. Key Rules and Their Meaning
- COBS 9.1.1R – “This chapter applies to a firm which makes a personal recommendation to a retail client in relation to a designated investment; manages investments of a retail client; or manages assets of specified pension schemes.” This rule clearly defines when suitability obligations must be triggered.
- COBS 9.1.2R – Allows firms giving basic advice on stakeholder products (outside MiFID) to follow simplified suitability requirements in Section 9.6 rather than the full COBS 9 framework.
- COBS 9.1.5R – For professional clients receiving non-MiFID life policy advice, only the Insurance Mediation Directive rules apply, not full COBS 9 suitability rules.
- COBS 9.5A (Guidance) – Defines ’insistent client’ and clarifies that if such a client insists on executing a transaction contrary to recommendation, advisers must ensure the client understands the risks and document the interaction.
4. Interpretation Notes / FCA Expectations
- Firms must not encourage clients to withhold information needed for a proper suitability assessment.
- The FCA expects suitability assessments to be comprehensive, proportionate to the firm’s role, and properly documented.
- In the case of insistent clients, firms must balance respect for client autonomy with duty-of-care requirements, ensuring proper risk communication and documentation.
5. Practical Considerations for Firms
- Develop structured fact-finding forms and update client profiles before recommending products.
- Establish and enforce procedures for basic advice assessments under Section 9.6.
- Create protocols to identify and record insistent client decisions, including risk disclosures and client acknowledgments.
- Maintain audit-ready suitability reports and records, ensuring justification of decisions is documented.
- Train advisers on their obligations, particularly around preserving client autonomy versus adviser duty.
6. Related Handbook References
- COBS 9A – For MiFID-standard suitability in investment advice and portfolio management
- COBS 7 – Insurance-based advice and disclosure rules
- COBS 5 – Appropriateness and suitability in non-advised sales
- PRIN 2A – Business Principles (particularly skill, care and diligence, and acting in customers’ interests)
- SYSC 9 – Record-keeping standards for client interactions and suitability justifications
7. Regulatory Focus / Enforcement Risk
- The FCA frequently enforces on firms that have poorly documented or absent suitability assessments, especially where client outcomes suffered.
- The handling of ’insistent clients’ is a known scrutiny area—firms must carefully document any deviation from advice.
- Retail pension advice is particularly high-risk; suitability failures in this area can lead to significant sanctions.