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FCA: Make separate suitability reports for insistent clients

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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.”

FCA: It is up to industry to tackle insistent clients issue

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.

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. It is not worth the risk, they already disagree with your advice and no doubt will have selective memory when it all goes wrong.

    I find it hard to understand how I could have an ongoing relationship with someone who thinks they know better, why bother with me other than to have someone to blame?

    • Trevor Harrington 1st August 2017 at 2:26 pm

      Such simple logic – couldn’t agree with you more Geoff.

      Why on earth the regulator doesn’t follow such simple logic and encourage the Adviser community to exercise their right NOT to transact such cases, is entirely beyond me ….

      … unless of course it is just those Advisers (so called) who simply cannot resist the temptation to transact what they see as lucrative insistent clients.

      By trying to accommodate such scoundrels, the regulator is creating a problem for itself (and us?), as there are such Advisers who will try and dress up bad business as “insistent business” …

      If it ain’t right … it ain’t right … and no amount of subterfuge or artificial disclaimers from the Adviser will make it so.
      If the client truly is “insistent” then let him go off and do it by himself … that is not a problem is it ?

      • Signed disclaimers of liability are commonly disregarded by the FOS so they aren’t worth a light anyway. Unless and until the FCA declares them to be legally binding on all parties, transacting any business on an IC basis is playing with fire.

        What the FCA seems to be suggesting is that if a client wishes to go against the recommendations in your SR, you should then, in addition, write an UNsuitability Report.

        But why bother adopting any approach other than: This is my advice. Take it or leave it. If you want an Unsuitability Report, that’ll cost extra.

  2. Consideration needs to be given to the weight of importance the client puts on a particular feature of their planning vs. that of the adviser (and how these viewpoints may well differ).

    DB transfers being the obvious example.

    If a client is putting more importance on the perceived value of early (and flexible) retirement than the security of a guaranteed index linked income for life, how does the adviser accurately incorporate the clients weight of importance in their advice…

    i.e. the critical yield is 8% but you really really REALLY want to retire early knowing full well this may well be at the expense of later income.

    We separate out the financials from the subjectivity but if the client isn’t prioritising the financials and we are, ‘insistent clients’ can be created… in reality, it’s a different viewpoint (and who is to say who’s opinion is correct?)

    • Trevor Harrington 3rd August 2017 at 5:23 pm

      unless of course it is just those Advisers (so called) who simply cannot resist the temptation to transact what they see as lucrative insistent clients.
      By trying to accommodate such scoundrels, the regulator is creating a problem for itself (and us?), as there are such Advisers who will try and dress up bad business as “insistent business” …

  3. Reading many of the comments here I wonder how many of these taking the “don’t do it” approach, always listen to and act upon expert advice they receive?

    Whilst I fully agree with the danger of the FOS making a ludicrous decision. I would make this observation.

    The client has paid you for your advice (which is your product), your on record advising against the proposed transaction, but at the end of the day, it’s the clients money and their life and therefore their choice.

    The FOS can only take action against the “advice” you provided. Which is not to do it. As such I am wondering what ruling people think the FOS could make?

    Many people including yourselves make very poor choices, even after receiving expert advice, does that mean the professionals should throw them to the wolves if they don’t act upon that advice?

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