Practical ways to help insistent clients

Long-standing clients, with whom advisers have had a good working relationship, may be more willing to accept what an adviser is recommending.

However, first-time clients - perhaps those driven towards independent advice out of frustration because their pension provider will not release their defined benefit (DB) pension without having obtained advice - will be more difficult to persuade.

Regardless of the potential problems with insistent clients there are ways to help those who come to you with their minds already seemingly made up.

Education

Education is a key factor. “Full advice and clear details of everything they are giving up is key to help the client understand,” says Claire Trott, head of pensions strategy for Technical Connection.

According to a Personal Investment Management and Financial Advice (Pimfa) Association spokesman, it is helpful to consider the knowledge, experience and general financial sophistication of the client.

The spokesman suggests:

• Ask whether the client really understands the potential consequences of this decision.
• Will other people be affected by the client’s decision, such as their financial dependents?
• Is the transaction being done to hide assets ahead of a divorce settlement?

This will help to educate the client about their real motives and needs, as well as inform the adviser of what the client's real end goals actually are - which may not need to be met with a transfer.

Suitability

Providing good suitability letters, in clear and concise English will help the client to understand what they are getting into and could help protect them from making a bad decision.

Moreover, making sure the client understands what is a suitable course of action to them, taking into consideration risk and return and a comparison of the firm’s preferred advice, is an important means to ensure the client understands whether their desired route will work out well for them.

As the Pimfa spokesman says: “The advisers should have a policy in place, which at least meets the FCA guidance.

“When a client preference moves to ‘insistent client’ and if the adviser is prepared to proceed on that basis, then the advisers must ensure the stated of that advice are clearly documented.”

Keeping on top of regulation

With the Financial Conduct Authority expected shortly to publish its findings and final guidance on its August consultation paper CP 17/28, advisers should be keeping an eye on the FCA’s website.

Its Financial Advice Market Review: implementation part II and insistent clients specifically highlights ways in which it expects advisers to deal with the issue and make sure the best possible client outcome is achieved.

But while the gaps in the legislation and regulatory guidance are being addressed, Sankhar Mahalingham, head of defined benefit growth for Xafinity, believes advisers should also consider what sort of ‘insistent client’ behaviour they have been experiencing.

He comments: “It is important to understand volumes and trends at the adviser level. The volume of insistent clients, whether high or low, might say something about each adviser’s process.”

If the processes are in line with the guidance already given – and that which is expected to come – then the adviser should be able to rely on these when it comes to dealing with any level of insistent client activity.

Processes

“Advisers need to have a sensible process in place for dealing with insistent customers.

“Trustees of DB schemes, and their administators, need to be vigilant and ensure their members are properly educated and supported.”

Mr Mahalingham also believes strongly that IFAs can make better use of their technology, with live benefit and options modelling to aid the advice process. A picture, after all, is worth 1,000 words.

Moreover, as the Pimfa spokesman asserts: “A record of insistent client business should be maintained, including any complaints if they arise in the future.

“The firm would also be wise to subject such business to a higher level of internal supervisory and compliance checking.

“A disproportionate level of insistent client business for an individual adviser might indicate a training need.”

However, as Keith Richards, chief executive of the Personal Finance Society points out: “The regulator’s three-stage guidance process is noted, but at no point is it suggesting it is okay to transact against personal suitability and the best interest of the client.”

Working with others

Advisers who are not registered with the Financial Conduct Authority as pension transfer specialists will need to be able to refer business to those with the appropriate qualifications.

However, this does not mean the original adviser is not liable for the advice.

There are also lawyers, accountants, scheme actuaries and trustees who might potentially be involved to some degree with a client who wishes to transact on an insistent basis.

In this respect, it is worth building up a network of connections to help provide professional advice and support.

When it comes to transfers, John Vaughan, compliance manager for Mattioli Woods, says the trustees of a scheme do not need to know the particulars of advice – they only need to know that advice has been given.

"Ultimately, it is the client’s money and their decision," he says, adding: “What we as advisers must do is ensure we fully explore the client’s circumstances, understand their demands and needs, and turn every stone in the search for a suitable solution, including reference to external advisory bodies where debt is involved.

“We thus come full-circle, in that the regulator expects our advice is suitable to the client’s needs.”

Mr Mahalingham strongly believes trustees and administrators need to be “vigilant” and proactive in ensuring members understand the range of options available to them.

Refusal

This could be the last port of call, but it is still a resort for advisers who know the client will transfer anyway, despite all the advice and warnings given.

As the PFS’s Mr Richards comments: “In summary, and particularly if the market turns, there is no certainty of outcome if an adviser completes an insistent client transaction and a client cries ‘foul play’ in the future."

In which case, Ms Trott says, stepping away could “be best for all involved”.

simoney.kyriakou@ft.com