This article provides a step-by-step guide as to how you can quickly and easily write a suitability report confirming your recommendations for your client to use a SIPP or SSAS to purchase a commercial property.
We can only think of two scenarios where you’ll use Genovo to recommend a commercial property purchase via a SIPP or SSAS:
- An existing SIPP / SSAS using some or all of its fund value to purchase a property, or
- An existing non SIPP / SSAS being switched into a new SIPP or SSAS and then using some of the transferred fund to purchase a property.
For the purposes of this article, we’re assuming that a brand-new plan without any switched-in funds simply won’t have sufficient fund value to purchase a commercial property, although we appreciate that with sufficient single contributions from a number of SSAS members and possibly with additional borrowing, it could be possible.
1) Select or add the client
Go to Write report and select or create the private client you wish to write the report to.
2) Select the Report Creation Method
3) Create the report
In Report Details, give the report a name and select the Report Type. If you're creating it 'from scratch', we'd suggest using the Suitability Report.
We take the view that the purchase of a commercial property is a significant change of direction of investment strategy (as opposed to a simple switch of underlying funds or portfolios), and therefore we only make the recommended actions required to support the purchase of a commercial property via a pension fund available in the Suitability Report.
4) Add the required sections
You’ll then be directed to the Report Builder where you should add the necessary sections from the 'Available sections' drop down , which in this instance are:
Scenario 1 - If the existing pension plan doesn’t allow your client to invest directly in commercial property, you will need to switch to a pension that does. Therefore, you’ll need to include the following sections:
- Review of Your Existing Pension Plans
- New Pension Recommendation
- Recommended Investment Strategy.
Scenario 2 - If the existing pension plan remains suitable for the client and allows them to purchase commercial property directly, then you’ll need to add the following sections:
- Review of Your Existing Pension Plans
- Recommended Investment Strategy.
5) Complete all section wizards
Next you'll need to step through the section wizards of all the sections that require your input, starting with the Introduction section.
6) Complete the Introduction section
You will progress through the steps of the Introduction section in the usual way. When you reach the Client Objectives step you should select or add the advice option(s) that accurately reflect the client's objective(s) and add comprehensive Know Your Client (KYC) information to ensure you fulfil the regulator’s expectations of you in terms of documenting a client's objectives. Alternatively, you can add the client's objectives as free text.
7) Complete the Client Risk Profile section
It's in this section that you will confirm the client's attitude to risk and capacity for loss, as well as their knowledge and experience and any investment preferences.
8) Complete the Review of Your Existing Pension Plans section
You’ll be prompted to provide information the existing pension within the Plan Summary step of the review section.
Scenario 1
If the existing pension scheme doesn’t allow your client to invest in commercial property, the plan will clearly need to be partially or fully switched into a plan that does. In this case, after you’ve entered the client’s existing plan on the Plan Summary step and then completed the Benefits and Features and Current Plan Charges steps, you’ll arrive at the Recommended Action step where you can select the recommended action of either ‘switch’ or ‘partially switch’ as appropriate for the scenario.
One of the standard Genovo advice reasons to support either the ‘switch’ or ‘partially switch’ Recommended Actions deals specifically with the objective to purchase a commercial property. Having selected this, you can edit it if required by clicking the pencil icon, or of course, you can really easily add your own advice reason by clicking the Add advice reason button.
Scenario 2
If the existing plan does offer the feature of investing in commercial property (i.e. it’s a SIPP or SSAS), then simply enter it in the Plan Summary step and after completing the Benefits and Features and Current Plan Charges steps and reaching the Recommend Action step, the recommended action to choose is ‘purchase a commercial property with’.
9) Possibly complete the New Pension Recommendation section
If you’re working with Scenario 2, then you’ll clearly need a new plan recommendation and this is the section where you’ll detail the new plan, and the rationale for the recommendation.
After you’ve added the recommended plan to the Plan Summary step, you’ll then move on to the Why Product step. It’s here that there’s another dedicated Advice Reason to support the purchase of a commercial property via a pension plan.
This time, you’ll definitely need to edit the Advice Reason to include details of the commercial property being purchased.
There are a couple more dedicated options in this section to support property purchase. Firstly in the Why Provider / Plan step….
…and also in the Key Disadvantages and Tax Implications step.
10) Complete the Recommended Investment Strategy section
Regardless of whether you’re using scenario 1 or 2, the next piece of the jigsaw for wizard sections with specific content to support commercial property purchase is the Recommended Investment Strategy section.
Having added the investment strategy, you should then add the underlying investments for the strategy. Clearly, at least one of the investments will be the commercial property and most likely, there will be a cash account too, to facilitate the plan charges and possibly the property management fees. Additionally, it’s quite likely that any rental income from the property tenants will be received into a cash account, at least initially.
You should note that while the table above shows columns for all the possible charges, only the completed fields are included in the table included in the downloaded report.
Once you've created the Recommended Investment Strategy, you should confirm the reasons why you're recommending it. Once again, you’ll find options that have been specifically designed to support a commercial property purchase by the client’s pension fund.
11) Complete the Important Information section
This is the last section you'll need to complete and is self-explanatory.
12) Tailor the structure of the report
Having completed all of the section wizards you should then tailor the structure of your report by unchecking any sections you do not wish to include in your report; and then change the sort order of any sections to reflect your personal preferences.
You’ll find more information about how to remove sections from your report here.
You'll find more information about how to reorder the sections in your report here.
13) Download the report / covering letter
Click the Download report / Download cover letter icon and the report / covering letter will download to word.