The Personal Finance Society’s chief executive has warned advisers that facilitating requests from ‘insistent clients’ could cost them when they renew their professional indemnity insurance cover.
Speaking this afternoon at FTAdviser’s Retirement Freedoms Forum in London, Keith Richards said that specialist insurers are alert to future risks around advice relating to defined benefit scheme transfers.
“You have to remember that just like car insurance, these contracts are annually renewable and they may well take the next opportunity to increase excesses or impose exclusions.
“Be wary in helping the government with their pension freedoms,” he added.
Mr Richards said that most professional advisers do say no to potential clients who only want to have a session in order to satisfy their scheme administrator, citing an example where someone had rung 12 different advisers.
The PFS has alerted the government to the problem it has created and the regulator to the fact the three step guidance on insistent clients is not actually in the COB handbook, but Mr Richards said neither will confirm how they might rule in the future.
As for the Financial Ombudsman Service, he said it is unfair to ask them what decisions might look like in five years as it has no understanding of the treatment of advice given today.
“Government and the regulator need to realise just how low risk financial advice is - the latest Fos statistics found that less that half of 1 per cent of all complaints were about regulated financial advisers,” commented Mr Richards.
Mr Richards suggested that advisers be clear about their charging structure and make sure they manage the expectations of new clients, as they will have no reluctance in claiming for mis-selling in the future.
Last month, FTAdviser revealed the Financial Ombudsman Service is backing advisers on ‘insistent clients’, as long as they follow the FCA’s guidelines to document that the client declined to follow the advice given.
The FCA has published a factsheet, detailing to advisers the three-step process to deal with insistent clients.
First, advisers have to provide their advice in a concise manner, emphasising the need to ensure the client’s understanding of the recommendations.
Second, in the case that the client desires to take another course of action to the one the adviser has recommended, the adviser should make clear what the risks would be involved with the client’s desired route.
Finally, if the client decides to go ahead with their desired course of action, advisers must be clear that this was not their recommendation. If the adviser does not do this, then it contradicts the first step.
Through all three steps, documentation is key to demonstrating the route of the conversation.
Last week, at another FTAdviser Retirement Freedom Forum in Edinburgh, the FCA came under fire for its handling of insistent clients, with Robin Ellison, head of strategic development for pensions at Pinsent Masons, telling delegates that the FCA had delivered a “wishy washy” response on insistent clients and “not a real response”.