The FCA is preparing further guidance on how advisers should be dealing with insistent clients, including suggesting that advisers prepare a separate suitability report for any advice that is being acted against.
The regulator does not currently define an insistent client – an individual who chooses to act outside of an adviser’s personal recommendation – in its rules, and has opened a consultation on how it will formalise its expectations.
In the formalised guidance, the FCA says it plans to clarify that advisers should make sure that “there is a clear distinction between the advice that is being acted against and any subsequent or concurrent advice.”.
“This might be achieved through distinct suitability reports,” it says.
The FCA also wants advisers to make sure the reasons behind an adviser’s recommendation are clearly documented, as well as the risks of the path the client wants and why the IFA did not suggest it.
Best practice, the regulator says, would be to document what a client said about their wish to act against advice in their own words, and to keep a clear audit trail that shows acting against recommendation came at the request of the client.
The consultation paper reads: “We recognise that where a client has received a personal recommendation they may choose to take a different action to the one that was recommended. It is essential that clients in this position have had the consequences fully explained so they understand the implications of proceeding against the recommendation.”
Both providers and advisers are currently split in the market over how to deal with insistent clients.
Providers including Hargreaves Lansdown will not transact on behalf of insistent clients, while the Personal Finance Society has encouraged its members not to transact as well.
However, a Money Marketing poll earlier this year, 56 per cent said that advisers should be allowed to transact against their recommendation.