7.2 Gathering Information and the Fact-Find

A fact-find is the structured process of gathering the information needed to make a suitable personal recommendation. Under COBS 9.2, a firm must obtain the necessary information about the client's knowledge and experience, financial situation and investment objectives so as to enable it to give a suitable recommendation. Without a fact-find, a personal recommendation cannot lawfully be made — the recommendation would not be supported by the information the rules require.

Purpose of the Fact-Find

The fact-find serves four purposes:

1. Suitability foundation: it provides the data against which any recommendation is judged suitable or not.
2. Evidence: it documents the basis on which advice was given, protecting both client and firm.
3. Risk and AML controls: it captures identity, source of funds and risk profile data needed for regulatory and anti-money-laundering purposes.
4. Review baseline: it gives a starting point against which changes in circumstances can be measured at future reviews.

Required Data Categories

A complete fact-find captures information across the following categories. Each is needed to assess suitability under COBS 9.2 and to meet the Consumer Duty's obligation to deliver good outcomes.

Attitude to Risk vs Capacity for Loss

These two concepts are frequently confused and must be assessed and recorded separately. The FCA's suitability rules and Consumer Duty guidance are explicit that a single risk score is not enough.

• Attitude to risk (ATR) is the client's subjective willingness to accept uncertainty in returns. It is usually assessed through a psychometric questionnaire plus discussion.
• Capacity for loss (CFL) is the objective ability to absorb a capital loss without it materially affecting the client's standard of living. It is derived from the financial position: income, expenditure, assets, liabilities and time horizon.

A client can have a high ATR (comfortable with risk in principle) but a low CFL (cannot afford to lose the capital), or vice versa. Where ATR and CFL diverge, the adviser must reconcile the two and record how the recommendation was adjusted — typically the lower of the two governs the recommendation.

Goals, Time Horizons and Dependencies

Suitability is judged against the client's objectives, not against a generic risk profile. A fact-find must capture:

• Specific goals (repay mortgage by 60, fund child's university, retire at 65 with £30,000 income).
• Time horizon for each goal (short, medium, long term).
• Priority of goals when they compete for the same money.
• Dependencies — children, elderly relatives, business partner, expected inheritances.

A client's request for a particular product ("I want to take my pension as a lump sum") is not an objective. The FCA's insistent-client guidance is clear that the adviser must identify the underlying objective (e.g. "pay off my mortgage") before recommending a course of action.

Existing Products and Source of Funds

Existing arrangements matter for three reasons:

1. Suitability of change: switching or consolidating must be in the client's best interest, not just administratively convenient.
2. Loss of benefits: exit penalties, guaranteed annuity rates, loss of tax-advantaged status must be quantified.
3. Cost-benefit: the gain from changing must outweigh the cost of moving.

Source of funds and source of wealth must be established to satisfy the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. Typical evidence includes payslips, sale proceeds, inheritance documentation, dividend or investment statements. Where the source cannot be reasonably explained, the adviser must escalate under the firm's AML procedures and may need to file a Suspicious Activity Report (SAR) with the NCA.

AML and KYC Information

At onboarding, the adviser must carry out customer due diligence (CDD) under the MLR 2017:

• Identify the client (full name, date of birth, address).
• Verify identity using reliable, independent sources (passport/driving licence plus utility bill or bank statement).
• Obtain information on the purpose and intended nature of the business relationship.
• Identify any beneficial owner where the client is a trust, company or other legal entity (UBO register).

For higher-risk clients (e.g. politically exposed persons, complex ownership structures, high-value transactions), enhanced due diligence (EDD) is required. Ongoing monitoring must keep the information up to date throughout the relationship.

Recording and Updating the Fact-Find

Fact-find data must be recorded in a durable medium and retained. Under COBS 9.5, suitability records relating to life policies, personal pensions and stakeholder pensions must generally be retained for five years; for pension transfers, conversion or opt-outs, indefinitely; and for other cases three years. A firm need not retain records if the client does not proceed with the recommendation, but good practice is to keep them.

The fact-find is not a one-off event. At each review the adviser must refresh:

• Personal and financial circumstances (income, assets, liabilities).
• Objectives and time horizons.
• Attitude to risk and capacity for loss (these change with life events).
• Dependencies (new children, divorce, bereavement, redundancy).
• Tax position.

A stale fact-find is a leading cause of unsuitable ongoing recommendations and a common finding in FCA suitability reviews.

Practical Fact-Find Checklist

A thorough fact-find is the difference between advice that is defensible, suitable and helpful — and advice that fails the client and the regulator.