RegulationJun 23 2015

Insistent clients guidelines released

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Insistent clients guidelines released

Advisers are able to complete transactions for clients that go against their recommendations, the FCA has confirmed in its factsheet on insistent clients.

Following the changes to pension transfer rules, concerns have been eased about best practice for advisers dealing with clients who demand a transaction despite being advised against doing so. The paper breaks down how to deal with these clients in three steps.

First, the adviser must provide advice that is suitable for the individual client, and this advice must be clear to the client. This should follow in line with the normal advice process.

Next, it should be clear to the client that their actions are against the adviser’s advice. Finally, the adviser should be clear with the client about what the risks are of the alternate course of action.

Alistair Cunningham, financial planning director at Wingate Financial Planning, said, “Where a client is looking to do something high risk and against our advice – for example, transferring out of a final salary scheme – then we would not ordinarily provide any service to assist this.

“We have a potential conflict where an individual wants to cash in their personal pension plan, even where we suggest more appropriate routes could be available – raising a loan for example. In these cases the ultimate contract is with the pension holder and an insurance company or pension administrator and we can merely stress the need to get advice, or as a bare minimum speak to Pension Wise. This is especially prevalent where our services are provided to the employer, and the pension holder is not the end client.”

The paper goes on to identify good practice as being where information gathering is bespoke, and not restricted by the limitations of a narrow process or a template approach. Omissions, inconsistencies and anomalies must be followed up, resolved and documented to create a full record of the facts on which the personal recommendation was based.

Poor practice is said to occur when, as a result of a fact find, it seemed likely that the client’s liabilities were a key element in choosing to access the cash against the adviser’s recommendation, and it appears that the client was not given any information about debt counselling to loan restructuring advice.