FCA gives green light to advice for ‘insistent’ clients

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FCA gives green light to advice for ‘insistent’ clients

The Financial Conduct Authority has published a factsheet designed for advisers on insistent clients, which confirms that advisers are able to advise on transactions or decisions that go against recommendations.

The factsheet on insistent clients is in response to a number of queries on the issue raised in feedback to its consultation paper on changes to pension transfer advice rules. The issue is outside of the scope of the original consultation, it states.

It states there is no rule to prevent advisers from transacting business against their advice if the client insists on doing so, but gives examples of good and bad practice and reiterates previous guidance to document the process.

The file should show that you have made it clear to the clients the risks associated with the alternative course of action and that the client is acting against your advice.

The regulator’s factsheet states that an adviser must ascertain the client’s investment objectives before making a recommendation, or undertaking any work.

“Although there are no rules specifically in relation to insistent clients, you must follow the normal advice rules first.

“A request or preference by the client for a particular solution - for example accessing cash from a pension - is not an objective. You must ascertain the client’s actual investment objectives so that you can advise on a suitable course of action to meet them.”

In the area of how common it expects insistent client cases to be, the FCA said it is unlikely to be common for clients who are seeking advice to disregard that advice.

“Where clients are required to take advice (for example in relation to DB pensions and other safeguarded benefits) then some may decide to disregard that advice. We do not have a pre-conceived idea about how often this will occur.”

The regulator said that four particular issues were raised that predominated the scope of the original consultation, including as well as insistent clients: safeguarded benefits definitions, transfer value analysis, and overseas residents and the requirement to take advice.

The FCA said that a number of respondents expressed their disappointment that the legislation defines safegaurded benefits “in the negative” and asked that it made the Department for Work and Pensions guidance as to the types of benefits that fall within the definition.

“We have raised this issue with the DWP. They have confirmed that they will work with us and engage with the pensions industry, over the coming months as the new pension flexibilities bed in, with a view to publishing broad categories/themes to help providers identify safeguarded benefits.”

ruth.gillbe@ft.com