Defined Benefit  

Advisers warned to steer clear of insistent clients

Advisers warned to steer clear of insistent clients

Financial advisers should refuse to deal with insistent clients, as they won’t have a lot of protection if their cases reach the Financial Ombudsman Service, experts have warned.

Despite the Financial Conduct Authority rules in this area, it will be difficult for advisers dealing with this type of customer to get professional indemnity insurance cover, said Daniel Kelly, director at Onyx Insurance Brokers.

Speaking at a webinar on defined benefit transfer advice organised by Prudential, Mr Kelly said the PI market considers this to be a high-risk area.

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He said: "We have some insurers that provide cover for DB but exclude insisting clients.

"We have other insurers that [dictate that] if you want cover for insisting clients, then first you need to confirm that you're following the FCA rules, and further they expect to see copies of the letters from the clients confirming that they accept what you're saying, but they want to do something else.

"And unless they are hand written and different in every scenario, then you're going to have problems. If it looks like the adviser has done it for them, then insurers won't be interested."

The FCA has set rules for how advisers should deal with insistent clients.

These include that appropriate advice has to be given following all the rules surrounding that type of advice. 

The adviser also needs to make it clear to the client what the risks are in following the alternative course of action.

If the advice includes a pension transfer, conversion or opt-out, there may be additional requirements, according to the FCA.

Finally, the adviser needs to make it incredibly clear the actions are against their advice.

Damian McPhun, partner at Beale and Company Solicitors, warned advisers often do not fully understand what an insisting client is.

He said: "I've come across cases where firms have treated every single customer as an insisting client thinking that gives them some protection, which is utterly bonkers.

"Insisting clients is a very difficult topic, and advisers don't get a lot of protection.

"The way Fos looks at this is if the clear and central advice is don’t transfer, and the client is absolutely adamant they want to, they will take the view that if you sign the document you gave the advice, and you're facilitating them to put themselves in a worse position.

"Nine times out of 10 the ombudsman will say that the adviser should have declined to do that, because they wouldn't be in that position, they wouldn't have suffered the losses, and therefore that redress falls on your door."

FTAdviser reported in September how the Fos ordered advice firm Portafina to pay compensation after giving unsuitable advice on a pension transfer, despite the client acknowledging he was "insistent".

In 2017, the Fos urged advisers who deal with insistent clients to get these individuals to put their intention in writing and tape them.