Advisers are split on how the regulator should proceed with possible changes to its rules around ‘insistent clients’, after the Financial Conduct Authority’s post-pension freedom consultation asked for industry views.
Following a data gathering project, the FCA revealed that just 9 per cent of pension providers always accept pension transfers requests from so-called ‘insistent clients’, while 30 per cent refused to accept any transfer requests from clients who do not to listen to advice.
The consultation, published yesterday (1 October), pointed out the refusal of advisers and providers to transact insistent client business is perceived as an impediment to DB scheme members wanting to take advantage of the pension freedoms available to DC scheme members.
While such transfers are permitted, the legislation requires sign-off by a pension transfer specialist - for benefits worth at least £30,000.
As the paper noted, and the regulator has repeated, its handbook makes no specific reference to insistent clients, but in response to industry demand in June it published three step guidance on the matter.
“We are aware that advisers are still uneasy about dealing with insistent clients, particularly in relation to scrutiny by the ombudsman service and the availability of professional indemnity insurance. We would be keen to hear further from advisers on how they consider that our rules could be amended to provide more certainty.”
The consultation also asked for views on why advisers consider that professional indemnity insurance acts as a barrier to undertaking insistent client transactions, something which was referred to this week by the Personal Finance Society’s chief executive Keith Richards at FTAdviser’s Retirement Freedoms Forum.
Responding to the call for views on the subject, Matthew Harris, IFA and owner of Dalbeath Financial Planning, told FTAdviser: “Our approach to insistent clients is simple, in that we will simply not facilitate a transaction which we believe is not suitable for our clients.
“The risks of being sued later, or subject to an expensive Fos investigation, are simply too great.”
However, Adrian Murphy, partner at Murphy Wealth, stated: “My thoughts on this are that if we do our job correctly and our recommendation is not to do something but the client’s circumstances are such that they still want to proceed we would help them with that, making sure it was all carefully documented.”
Greg Heath, managing director at Derbyshire Booth Financial Management, commented that he does not have a definitive answer, but does know what needs to happen.
“The FCA need to think about the end user, i.e. the client, who they are trying to protect, and think about their needs rather than just following a process.”
He suggested a stripping away of “unnecessary bureaucracy” and actually speaking to people who deal with real clients.
“To use an analogy it is like me going to buy a bicycle and the retailer being forced to explain to me all about the other means of transport including cars, buses, aeroplanes, trains, etc and quoting examples of that means of transport.