Approach to insistent clients

There is the traditional insistent client that disregards advice and wishes to opt for a different investment and Mr Hannant says the FCA expects incidents of these individuals to be rare.

The second type of insistent client comes from the government policy on pensions.

Because people need to have had advice to access safeguarded assets, Mr Hannant says some firms may see quite a few of these types of client.

Mr Hannant says: “It is consistent with the policy of pension freedom that people should do what they want with their assets.

“It is important that advisers are clear about what they have recommended and on what basis they are working if they decide to facilitate requests from insistent clients.”

At an Association of Professional Financial Advisers’ seminar in London at the start of July, both the Financial Ombudsman Service and the FCA stated advisers should tell ‘insistent clients’ to put in writing why they chose to ignore their adviser’s advice.

Harriet Myles, an outreach officer from the Financial Ombudsman Service, says so far the Fos has not seen any complaints filter through about clients that want to take a particular course of action, often a pension transfer, even after advice to the contrary.

She says: “Advisers we speak to seem to be coming up with good solutions on how to deal with them, things like cooling off periods and making these clients put things in their own words.”

The Financial Conduct Authority’s technical specialist for retail Rory Percival re-stated the regulator’s position on insistent clients, agreeing that advisers must make it clear that they are acting against advice and risk warnings.

He says: “If warnings are all in the same suitability report then it might look like ‘a nod and a wink’, while adviser generated disclaimer forms can easily just become just another bit of paper to be signed without being properly read.”

Encouraging advisers to get their clients to put pen to paper he says “you can’t argue with something in their own words”.

From a professional indemnity perspective, Umesh Puri, associate director of the professional indemnity division of Howden Insurance Brokers, says he would advise “extreme caution” when dealing with insistent clients.

Mr Puri says clear, detailed and accurate documentation is key especially when it comes to defending any future claim against the adviser.

He says professional indemnity insurers would expect the adviser to satisfactorily demonstrate the relevant systems and controls in place before offering Professional Indemnity cover.

Mr Puri says while insurers currently do not insist, a possible precaution could be for the adviser to recommend to their insistent clients they seek a second opinion.