Advisers should consider whether they write separate suitability reports for advice which isn’t followed by their clients.
The Financial Conduct Authority has made this suggestion in its proposals for guidance on insistent clients.
It has launched a consultation on its plans to publish its existing guidance on this issue in its handbook.
As part of the guidance, the FCA has said advisers should ensure there is a clear distinction between the advice that is being acted against and any subsequent or concurrent advice.
In order to achieve this, the FCA has suggested that advisers could create distinct suitability reports.
The FCA has also recommended that advisers keep a record of the process followed and communications to and from the client which make it clear that the action is against a personal recommendation.
It added that best practice would be for a record of the client’s intention to proceed against advice to be in the client’s own words.
The FCA said: “The Handbook does not currently define an insistent client or contain any provision specific to processing a transaction on behalf of an insistent client.
“We are aware that firms have differing views on how to deal with insistent clients and that some firms are unwilling to transact with an insistent client.
“We also know many pension providers are unwilling to accept a transfer where there has not been a positive recommendation to transfer.
“Our proposal is designed to increase confidence for advisers and providers when dealing with insistent clients.”
The FCA has defined an insistent client as someone who has received a personal recommendation and chooses to do something other than follow the adviser’s personal recommendation.
Advisers should comply with the requirements for giving a personal recommendation, communicate clearly what their recommendation is and the reasons it has been given, and communicate clearly the risks of the alternative course of action and why it has not been recommended.
The regulator issued a factsheet on insistent clients in June 2015, containing a series of steps to help advisers understand the FCA’s position.
Shortly after the introduction of the pension freedom reforms, a survey by the Personal Finance Society found that 80 per cent of advisers would not carry out an insistent client transfer - one where the client wanted to transfer their pension despite being advised against it.
damian.fantato@ft.com
