OpinionNov 27 2015

FCA wants you to act as third line of defence

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
comment-speech

Up until now you have just been expected to justify the advice you have given.

What is disturbing about comments made by the FCA yesterday about handling insistent clients is post pension freedoms it is clear the regulator wants advisers to now justify why they won’t touch certain individuals with a barge pole.

Yesterday FTAdviser reported Ritchie Thomson, manager for retail investment themes in the FCA’s Supervision Investment, Wholesale and Specialists division, said advisers need to be keeping records of why they reject insistent clients requests.

He said: “I don’t think it’s a difficult thing to do and we’ve got nothing against firms having an insistent client process in place.

“It is not our role to say any adviser of provider should accept this business, but we are concerned that people might be being denied access to the pension freedoms.”

I think the FCA mustn’t be entirely convinced that the so-called second line of defence they requested providers to act as isn’t enough to prevent savers blowing their pension and having to fall back on the state.

It was only back in January this year that the FCA sent out a ‘Dear CEO’ letter to provider bosses setting out how they expect them to act as a second line of defence.

Providers were told to ask clients specific questions around their circumstances, give relevant risk warnings and refer to guidance services or regulated advice.

In my mind, and clearly in the thoughts of some of the advisers who commented on our news story yesterday, whether you carry out a transaction with insistent clients or not the FCA now wants you to act as the third line of defence.

When all that signposting from providers has failed to steer insistent clients back towards a sensible path, the FCA now wants you to document what you did to highlight their stupidity to them.

Perhaps, it is time for the regulator to assist advisers with the creation of a blanket letter to be handed out to insistent clients who aren’t interested in reason - something that is the financial services equivalent of a dumping post-it note or text message reading “It isn’t you. It’s me.”

What should the letter contain?

Perhaps messages similar to what you may want to use when dispatching a former lover: This is hard for me, too. You’re making a huge mistake. I can’t do this anymore. I just don’t think we are a good fit. I hope we can still be friends. You deserve better than this. You’re going to make someone so happy someday.

Whatever you do, don’t just shout “get out” at insistent clients. Given yesterday’s FCA comments you may live to regret that emotional outburst.

Make sure you spell out why you don’t want them in your life.

Try to do it more tactfully than saying “You’re not a financial adviser. I am a financial adviser. I think what you want to do may leave you stuck with a choice between heating and eating. Please know I am walking away from you and if you go ahead with what you want to do you will have nobody to blame - or chase for compensation - but yourself.”

Good luck.

You can learn more about how networks and trade bodies reckon you should deal with this issue - and earn CPD - by reading FTAdviser’s Guide to Handling Insistent Clients.