OpinionMar 30 2015

Say ‘no’ to insistent professional bodies

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Say ‘no’ to insistent professional bodies
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Personal Finance Society chief executive Keith Richards’ article on saying no to insistent clients and its foray into providing compliance guidance to advisers prompted me to write a post on the PFS President’s Thinktank on LinkedIn.

This has provoked some excellent responses from other members of the group.

I am not looking to criticise Keith Richards, as I think he is doing a fantastic job in promoting the Personal Financial Society and our profession. I am just concerned, firstly by the role of a professional body in providing compliance guidance and secondly by the whole subject of ‘insistent’ clients.

I fully understand my responsibility to help clients avoid making bad decisions, but to suggest that we “say no” to any insistent client is, I believe, unreasonable. This would be to adopt an approach that many other professions would not follow.

Would a barrister who advises their client to make a guilty plea based on the evidence, refuse to defend them if they plead not guilty?

Why can’t we judge whether our clients have sufficient capacity to understand issues relating to their financial affairs that are laid out in detail in our suitability reports?

This doesn’t mean they need the same level of knowledge we have, to make this decision. The same way I don’t have the same level of knowledge as my doctor when I ignore his advice to play less squash because of the effect it is having on my knees. I am sure I will be less mobile in old age as a result, but I have taken the informed decision that for me personally it is more important to be active now.

As a professional adviser I always look to provide my clients with the optimal solution to their needs. However, this does not mean that if they do not follow my advice they will end up destitute. Indeed, put three advisers in front of the same client and you could easily get three different versions of what “suitable” advice is.

Defined benefit scheme transfers have received a great deal of attention recently and it is undoubtedly a high risk area of business. Despite relatively high transfer values in the current climate, it is not uncommon for the return required for matching the transferring scheme benefits to be unachievable based on reasonable growth assumptions. Therefore the advice may often be not to transfer.

Now a client may cite poor family health history, a desire to pass a lump sum to the children, concerns over their employer, a wish to use the funds in their own business, etc, as their reasons for wanting to do so. There is no transfer value analysis system for assessing these factors and we can only use our professional judgement.

When in possession of all of the facts, if the client decides that they understand the argument but would like to proceed, am I treating them fairly if I refuse to help select an appropriate product and investment strategy? It seems more logical to help them make the best of the course of action they have decided to take even if it is contrary to the advice.

As with any profession, we are regularly faced with a variety of options and a variety of potential outcomes in any client’s affairs and navigating these is not an exact science.

Is there is any less risk in advising a course of action that turns out, with the benefit of hindsight, to have been wrong? Particularly when there is a chance you will alienate the client?

What if inflation was not the projected 2.5 per cent, investment returns were greater than the critical yield, annuity rates improved, the previous employer went into liquidation, the Pension Protection Fund rules changed, their health deteriorated, etc.

Where do I stand if I had refused to help that client, who insisted that they understood all of the risks? Maybe the PFS will come to my aid?

Richard Leonard is a director and chartered financial planner at Kirk Newsholme Financial Planning