Insistent clients are a growing concern for advisers, Rory Percival, technical specialist at the FCA has announced at this year’s Morningstar conference. Issues surrounding how to deal with such clients have been one of the top concerns fielded by the FCA from advisers, leading the regulator to outline three steps to help advisers deal with these scenarios.
The first step the FCA recommends advisers is to deal with insistent clients is to simply provide their advice in a concise manner, emphasising the need to ensure the client’s understanding of the recommendations.
Secondly, in the case that the client desires to take another course of action to the one the adviser has recommended, the adviser should make clear what the risks would be involved with the client’s desired route.
Finally, if the client decides to go ahead with their desired course of action, advisers must be clear that this was not their recommendation. If the adviser does not do this, then it contradicts the first step.
Through all three steps, documentation is key to demonstrating the route of the conversation.
Rory Percival, technical specialist at the FCA, said, “If you take these 3 simple steps, I don’t see how you will have a problem.”
Mr Percival recognises that advisers might have to go ahead with the transaction for their client that they did not recommend, and said, “We’re saying you can transact against your advice, but you have to make your advice very clear.”
The FCA has raised concerns that advisers are not properly dealing with insistent clients, as issues have arisen where the adviser has either not made it clear what their advice is to the client, has not properly documented conversations, or has not got to the heart of what the client wants to achieve.
The regulator pointed to scenarios where the client has not been insistent, but had been processed as an insistent client by the adviser in order to avoid some rules, mainly those of suitability.
Disclaimer forms have been pointed to as a potential step to avoid future complaints from insistent clients who did not take the adviser’s recommendations. However, Mr Percival added, “One of the concerns we have about disclaimer forms is that it is just another form to sign, and the client may not understand it. That’s why we think it’s better if it is in the words of the client.”
The FCA is considering putting together a question and answer-style document for advisers on the topic of how to deal with insistent clients. In the meantime, advisers can contact the regulator with specific concerns they have regarding clients not taking their recommendations.
