Government and regulators have not had a firm stance on insistent clients per se, although it is becoming increasingly clear to both policy makers and those implementing policy that there is a potential issue around insistent clients when it comes to pensions.
Sankar Mahalingham, head of defined benefit growth for Xafinity, believes the regulator has a “certain level of concern” when it comes to insistent clients.
According to Ryan Markham, head of member options for Hymans Robertson, this is certainly the case. He comments: “The Financial Conduct Authority (FCA) is taking an increased interest in insistent clients, primarily due to potential member detriment in this area.
“Financial advice firms have also been vocal in calling for more clarity and guidance on how to treat insistent clients, so their advice principles and professional indemnity can reflect this.”
He said the whole industry would welcome more guidance and clarity on this area when the regulator issues the outcomes of its consultation.
For Claire Trott, head of pensions strategy for Technical Connection, the regulator has been clear about how it believes insistent clients should be dealt with, and welcomes the latest Financial Conduct Authority consultation paper - Financial Advice Market Review: Implementation part II and insistent clients.
She highlights the three points made by the FCA:
• Appropriate advice needs to be given following all the rules surrounding that type of advice.
• The adviser needs to make it clear to the client what the risks are by following the alternative course of action.
• The adviser needs to make it incredibly clear the actions are against their advice.
Alastair Black, head of financial planning propositions for Standard Life, believes the consultation came “at the right time for advisers and their clients” in terms of setting in stone good practices for the thorny area of pension transfers.
Mr Mahalingham says there had been some “gaps in the legislation and regulatory guidance, which have been acknowledged and being addressed as part of this current consultation”.
According to Mr Black, the regulator’s consultation paper is a “good indication of travel” but there may be further legislation and guidance to watch out for.
Awaiting the outcome
The FCA’s consultation has only recently closed for comments and the outcomes are expected to be announced later this year – or early in 2018 depending on timings.
But what is clear from advisers is that the guidelines need to be tight and robust, not just to protect consumers – one of the FCA’s pillars – but also to protect the providers and advisers from allegations of misinformation or mis-advice.
Mr Black says he believes the outcome of the consultation should result in “safer DB transfers” for clients.
Mr Markham also thinks this could benefit clients with advised defined contribution to defined contribution (DC to DC) transfers, although this is not as much of an issue as DB to DC.
Additional regulation will also benefit those who are advising on pension transfers. Mr Black comments: “Advisers have told us they need strong regulation and clear expectation setting to avoid confusion and to protect all involved in the transfer process, this includes insistent clients.