OpinionApr 8 2015

We are here to inform clients’ decisions

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In response to the PFS writing to the FCA about insistent customers, the point at issue is in fact much broader than this. It is whether advised transactions (or ‘arrangements’) require a recommendation. The concept of a ‘suitability’ test may imply it does.

FCA rules no longer explicitly require advisers to give a recommendation. That was a realistic change in approach, recognising – assuming it was deliberate – that choices are not always, or even usually, black and white and that more than one choice may be reasonable.

Indeed, many that appear less rational may still be justified by either a different set of probability weightings or emotional preferences. This definitely describes the choices for exploiting pension freedoms. They challenge regulation (the FCA and Fos) far more than advice.

The job of a professional financial adviser is to inform clients’ decision-making. We cannot expect to be tested against that benchmark if we appear willing to act as proxy decision-makers for voluntarily dependent clients. Where we act on behalf of genuinely dependent clients, effectively making ourselves a fiduciary, there are good reasons for declining to advise unless the dependency is recognised by inserting a third-party fiduciary between the client and the adviser.

Stuart Fowler

Director,

Fowler Drew,

London