Pension FreedomJun 21 2017

FCA promises 'greater clarity' on insistent clients

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FCA promises 'greater clarity' on insistent clients

Updated guidance on how advisers should handle insistent clients will be included in the FCA's Handbook, the regulator has stated.

In its 65-page consultation paper, Advising on Pension Transfers, published today (21 June), the FCA stated it acknowledged there was no current definition of an insistent client.

The FCA also admitted there has not been any specific provision in its handbook to outline how insistent clients should be dealt with and, as a result, it will issue a consultation later this year with a view to introduce specific Handbook guidance.

In May 2015, the then technical specialist for the FCA, Rory Percival, now a freelance consultant, outlined a three-step process by which advisers should deal with insistent clients. 

However, this was seen as lacking by the industry.

At the time, advisers such as Greg Heath commented: "Nothing is that easy or straight forward in this industry. Until we get clear rules to follow, then it is better to turn the insistent clients away.

"Maybe our regulators should spend time with actual clients and advisers to understand what is going on at the coalface of the pensions industry."

Shortly afterwards, the regulator issued a factsheet on insistent clients in June 2015, containing a series of steps to help advisers understand the FCA’s position.

The regulator has now admitted that adding proper guidance within the Handbook would provide “greater certainty” for firms.

According to the latest consultation paper: “While our fact sheet continues to apply, we recognise that adding guidance to our handbook will provide greater certainty for firms. 

“We also recognise that the issue of insistent clients applies to a number of areas of advice and not simply in respect of the transfer and conversion of safeguarded benefits.

“We will therefore consult to introduce handbook guidance based on the core elements of the factsheet in the coming months.”

Currently, the FCA uses the term ‘insistent client’ to: “describe an individual who has received a personal recommendation and chooses to do something different than what was recommended with the help of the adviser who gave the personal recommendation.”

The consultation paper stated: “This factsheet used the example of pension transfers as this is an area where insistent clients are particularly relevant. The content of this factsheet continues to apply.

“It is for an adviser to decide whether they will process a transaction that goes against a recommendation they have given.”

The issue of insistent clients has been a sticking-point for the industry ever since pension freedoms came into force in April 2015.

In January last year, law firm RPC warned advisers to be vigilant over ‘insistent clients’ and pension transfers, after the regulator sent out data-gathering questionnaires to 400 advisory firms.

Senior industry spokesmen have also criticised the lack of definitive guidance from the regulator over the past two years, claiming the FCA had not gone far enough to explore and explain all the risks involved with insistent clients.

Keith Richards, chief executive of the Personal Finance Society, said: “We have been very clear regarding the practice and risks associated with ‘insistent’ client transactions from the outset.”

Whether the latest announcement by the FCA will achieve the clarity that is needed is yet to be seen, however, as the industry will have to consult and then await the outcome of that.

Responding to the current consultation, Steven Cameron, pensions director at Aegon, said: “While this is a complex area and can’t be rushed, the FCA’s timeline means final rules won’t be provided until next year.

"We need to explore if there are interim solutions which can give advisers confidence in the meantime to meet current consumer demand.”

simoney.kyriakou@ft.com