Michael Douglas’s character in Joel Schumacher’s cult classic film Falling Down evokes a lot of sympathy for the average, downtrodden man.
In one scene, insisting on his rights as a customer, he is so displeased with the sorry-looking burger he is given, instead of the delicious image on the advertising board, he loses the plot violently.
Thankfully most demanding customers in the financial advisory world don’t come to an adviser’s door with a bag of weapons, but every adviser will have faced a situation where a customer has butted heads with the expert, despite every well-reasoned argument from the adviser.
In that respect, insistent clients have been around since the beginning of time. But did pension freedoms bring a new wave of determined-but-wrong clients to your doors, or simply bring them out of the woodwork?
John Vaughan, compliance manager for Mattioli Woods says: “It is more of an adviser’s term for clients who wish to transact business against our advice, and has been around for a long time.”
Sankhar Mahalingham, head of defined benefit growth for Xafinity, agrees: “We don’t believe it’s a new issue brought about by the freedoms.
“The combination of low gilt yields, which resulted in high transfer values, and pension freedoms have just exacerbated the issue.”
Mr Vaughan points out the term itself is not covered in the Financial Conduct Authority’s (FCA’s) handbook, although the FCA has “addressed the concept of insistent clients and, in particular, recently regarding pension transfers”, but he does believe pension freedoms “may have raised its profile”.
Regardless, Mr Mahalingham thinks the insistent client issue “is a major issue for trustees to get to grips with”.
Claire Trott, head of pensions strategy for Technical Connection, believes while the problem seems to be raising its head again now, it does echo problems in the past with insistent clients.
According to her, there have always been “issues” with clients who are advised to do one thing but want to go against the advice and do something different.
“This doesn’t even have to be related just to pensions,” she says, although there was one particular pensions situation that involved insistent clients, then just as now.
She says: “There was a real issue back in the late 1990s when we were dealing with the pension review cases, that clients had opted out or transferred their defined benefit (DB) schemes but the regulators at the time felt it was not suitable.
“The fact someone was a true insistent client or even execution-only back then was hard to prove from the documentation, and in most cases, the fact the adviser had facilitated the transfer or opt-out was enough to pay compensation.”
Earlier this year, FTAdviser reported that advisers who had to deal with the pension review cases back in the late 1990s have said the pension freedoms, coupled with low gilt rates, and high transfer valuations, have led to a rise in DB transfers that raises red flags.