Advising Mister insister

Advising Mister insister

Attention has focused recently on the thorny issue of insistent clients and what to do with them. A hornets’ nest has been stirred, I suspect.

Both regulators and professional bodies such as the Personal Finance Society have waded in, as have such bodies as Fos. A number of questions must be asked, and we must define what constitutes an ‘insistent client’.

Despite the views of the experts there is no real consensus here, but the nearest thing to a definition is that an insistent client is one who, more or less, demands that his adviser follow a certain course of financial action, even if it is contrary to the advice given.

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This means that the client is, in principle, going against the advice of his adviser. Ultimately this is the client’s prerogative, just as lawyers cannot insist their clients plead guilty or not guilty. The real question is what advisers do in these circumstances to protect themselves in case it all goes horribly wrong.

I recall talking to one adviser a few years back who was advising a wealthy client on how to invest the proceeds from a business sale. Many millions were to be invested. The fee-based adviser went away and carefully built a portfolio of investments and a plan, taking many weeks to do this to ensure he met the client’s brief.

He duly presented the recommendations to the client. Some weeks later he rang the client, who said he had decided to do the complete opposite of the advice and put all his windfall into a relatively high-risk property scheme suggested by a business acquaintance. To be fair he knew plenty about the property market, but the original adviser was aghast. Fortunately the client appreciated his hard work and paid the fee regardless of the fact that he ignored the advice given.

This is not a complete definition of an insistent client but the story reminded me that sometimes advisers do face difficulty in persuading some clients of the virtues of the right course of action. Clients may always want to take more or less risky courses than suits their needs or pockets.

That is their choice. Certainly in the case of some very strong-willed, self-made individuals it may be very difficult to persuade them from following a particular course of action. In these cases it may well be perfectly all right for a adviser to produce a detailed financial plan which the client appreciates, but then chooses to act on only parts of the advice or do something different.

The FCA’s technical specialist Rory Percival helpfully recently tried to come up with some guidance on insistent clients. He came up with a three-step process: Initially, advisers should give concise advice and ensure clients understood it; secondly, advisers should make it clear the risks a client would face going down a different route to one recommended; and lastly, the adviser should make it clear that a client was choosing to follow a route that was not recommended by an adviser.