Despite guidance from the Financial Conduct Authority, the issue of what advisers should instruct ‘insistent clients’ is still shrouded in controversy.
The FCA have previously said there is no rule to prevent advisers from transacting business against their advice if the client insists on doing so.
The regulator has also instructed advisers to tell ‘insistent clients’ to document the reasons for ignoring their advice.
Due to there being no industry standard on ‘insistent clients’, providers have had to develop their own guidelines for dealing with these types of consumers with some choosing to withdraw advice from this group altogether.
Gill Davidson, group regulatory director at adviser network Tenet, said: “We agree with the general premise that advisers are not order takers and that there will be circumstances when an adviser should simply walk away from a customer where the transaction is clearly unsuitable and would lead to significant customer detriment.
“However, we equally believe that there is a place for an insistent client process and if that process is followed correctly then the opportunity for FOS to find against an adviser in the future is mitigated.
“The most important factors are that the customer is placed in an informed position and must be made fully aware of the consequences of not following the advisers primary recommendation. We therefore require a client to write their reason for insistence rather than rely on a file note.”
However David Carrington, sales and marketing director at Personal Touch Financial Services, takes a different approach to ‘insistent clients’.
He said: “We are clear on this and declared our stance early. We do not allow transactions from insistent clients. The future advice liability is too great.
“The problem isn’t today where you are dealing with say a close friend and their spouse. The problem comes when the client remarries to someone you’ve never met and then when the new widow starts asking where all the pension money has gone. The first person in line when her lawyer gets on the case is the poor adviser who allowed his friend to ignore their advice.
“Using this pragmatic approach we have had no difficulties explaining the stance to our members who appear to understand the risks and are able to work within the guidance.”
In July Old Mutual Wealth collected data on advisers’ positions on insistent clients.
Their survey of 251 advisers found that 36 per cent had told clients they could not agree to process a request which goes against their instruction.
While 22 per cent said they would process the request but stipulated that it is contrary to the advice given.
Five per cent of the advisers asked were still deciding upon a position.
Matthew Patrick, communications officer at the Sense Network, describes how they have taken the position adopted by the majority of advisers surveyed by OMW.
He said: “We have never allowed insistent client business and we continue this policy.
“When presented with an insistent client, our advisers will either disengage the client or offer their own advice.”
