FCA reveals how providers handle ‘insistent clients’

FCA reveals how providers handle ‘insistent clients’

Just 9 per cent of pension providers polled by the Financial Conduct Authority always accept pension transfers requests from insistent clients

The FCA’s analysis of pension freedoms data, published today (16 September), found that from a total of 107 responses, 61 per cent of pension providers said they will accept pension transfer requests from insistent clients “in certain circumstances” and 30 per cent refused to accept any transfer requests from clients who do not to listen to advice.

The regulator stated it is apparent that most providers that state that they do not accept insistent clients, or will only do so in certain circumstances, do not ask advisers whether they are acting on an insistent client basis.

If a customer is able to find an adviser willing to act on their behalf, the regulator found it is likely that providers will accept the transfer.

Two main reasons were given by firms for refusing to accept transfers from insistent customers: first where the transfer concerned a DB scheme or one with other safeguarded benefits and secondly where the transfer is not facilitated by a financial adviser.

Other circumstances mentioned by firms included when the investment type concerned was deemed unsuitable, where due diligence conflicts were present, or the transfer was from an occupational scheme and where the financial adviser could not show adherence to FCA guidance.

The City watchdog asked providers whether there was any variance of their approach to insistent customers by type of customer or the type of option the consumer was seeking to access.

Nearly all firms stated that there was no variance in their approach, but of the firms that did vary their approach, the reasons cited were a case-by-case approach taken to the issue, or due to the type of legacy plan held by the consumer.

The regulator also found some providers required advice over and above the legislative requirements, with a small number of firms outside of the largest 15 requiring advice for those seeking to transfer in all cases, and some firms requiring advice in other circumstances.

For safeguarded benefits of more than £30,000, section 48 of the Pension Schemes Act 2015 requires that the trustees or managers of a scheme check that a member has received appropriate independent advice before allowing a conversion or transfer of safeguarded benefits to flexible benefits.

The FCA’s data on handling of insistent clients comes after it yesterday (16 September) hit back at claims from the Personal Finance Society that it is “dodging” the ‘insistent client’ issue, stating it has published guidance for advisers.

As part of the work and pensions committee ‘pension freedom guidance and advice inquiry’, the PFS submitted evidence asserting that the public deserves improved access to regulated advice to enable better informed decisions and future outcomes.

Amongst other things, the professional body demanded clarity over insistent clients.

But earlier this year, FCA technical specialist Rory Percival outlined a three-step process to help advisers not get caught out by insistent clients. He said they should provide advice in a concise manner, emphasising the need to ensure the client’s understanding of the recommendations.