The trade body has warned the ombudsman's stance on certain complaints could undermine the existence of focused advice, which the Financial Conduct Authority defines as "advice focused, at the request of the customer, on the provision of personal recommendations relating to a specific need, designated investment or certain assets".
The trade body has asked advisers to send in cases where an ombudsman has found against them for actions a client took without their recommendation so it could build up a body of evidence.
Chris Hannant, Apfa’s director general, said the rules on this issue appeared to be ambiguous and he is keen to tackle this issue.
He said: “To what extent can focused advice really exist and how can you be responsible for something you don’t know about?
“To what extent can a client determine the services they want to receive and to what extent does the adviser have to be more invasive, as opposed to just accepting what they have been told?
“I have just been through the FCA’s guidance on the different types of advice and it is all very silent on this.
“I am going to get in touch with the policy people at the FCA because they are looking at the advice/guidance split at the moment.
“It puts a question mark over whether focused advice is possible.”
According to the FCA’s guidance, the provision of focused advice does not mean advisers do not have a duty to use reasonable skill, care and diligence.
Mr Hannant said the issue was particularly common in the area of self-invested personal pensions, where an adviser might set one up for a client who then uses the pension pot to invest in an asset without informing the adviser.
For example, there have been instances where advisers have been told to pay compensation after setting up Sipps on an “execution-only” basis for clients who have invested in Harlequin or Stirling Mortimer.
In a recent case an adviser was told to pay out after recommending an investment in Connaught but also because the client unilaterally decided to increase their holding.
It was this case that prompted Neil Liversidge, managing director of West Riding Personal Finance Solutions, to raise the issue with Apfa and he said advisers who feel a decision against them has been “perverse or unjust” should contact the trade body.
He said: “If an adviser has no contract with a client for a particular transaction, how can he or she be justly held liable for its consequences?
“Moreover, clients who do [this] invariably do it for one reason and one reason only – so as to avoid paying a fee.
“In essence they are taking advantage of the adviser and cheating him or her.”
He said he had also had experience of a client who had unilaterally decided to make investments of his own despite Mr Liversidge constructing a portfolio for him.
A spokesman for the Financial Ombudsman Service said: “In each case we base our decision on the very particular circumstances involved to decide what is fair and reasonable.
“When considering what is fair and reasonable in all the circumstances we take into account the relevant law and regulations, regulators rules, guidance and standards, codes of practice and where appropriate what we consider was good industry practice at the time.”
damian.fantato@ft.com
