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FCA and Fos approach to insistent clients

This article is part of
Guide to handling insistent clients

The three broad steps the FCA says firms should take are:

1) Firms must provide advice that is suitable for the individual client, and this advice must be clear.

2) It should be made clear to the client that their actions go against the advice being given.

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3) It should be made clear to the client what the risks of the alternative course of action are.

Importantly, Linda Todd, head of operations at Bankhall, says the FCA has made it clear that they expect it to be uncommon for clients who have sought advice to reject that advice, and proceed on a different basis.

Therefore, Ms Todd says the message is clear that ‘insistent client’ transactions should be the exception, rather than the norm.

In other words, she says the FCA clearly feels if firms follow the above steps sufficiently then the expectation is that the majority of clients would be inclined to follow the recommendations being made.

Ms Todd says: “The FCA has also already highlighted some of their key concerns from cases they have seen, principally that in a number of previous cases the adviser’s recommendation is not clear and risks have not been adequately explained.

“Additionally, cases have been incorrectly processed as ‘insistent client’ cases where this does not reflect the reality (for example, where the advice is simply a reflection of what the client has requested they would like to do).”

Keith Richards, chief executive of the Personal Finance Society, says that it is important to be absolutely clear that the FCA are neither saying that facilitating an insistent client transaction is wrong or right.

He says the FCA is simply saying that if an adviser chooses to facilitate an insistent client instruction then they should follow the three stage process.

Mr Richards says the issue remains that ‘insistent client’ does not form part of the official Conduct of Business rule book but always acting in the ‘best interests’ of the client is.

At the time this guide was produced, Mr Richards says the Personal Finance Society was seeking confirmation from both the FCA and Treasury about whether advisers will be in breach of COB rules by transacting an activity against the clients best interests.

He says: “We are also seeking a variation of process to better protect consumers and the profession under such circumstances and the provide certainty of future treatment when the outcome of a poor decision becomes more evident.

“We don’t want to give the ‘ambulance chasers’ a new stream of revenue.

“The FCA Pension Freedoms Data Collection Report in September 2015 showed that 91 per cent of small adviser firms wouldn’t deal with pension transfers for insistent clients as a general principal, although just over 50 per cent stated they would consider the circumstances.

“The PFS’s own member survey has shown that 81 per cent of members will not transact Pension Freedoms ‘insistent clients’ under any circumstance with the balance cautious.”