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FCA: We don’t want IFAs to be ‘order takers’

FCA technical specialist Chris Hewitt speaking at Finaltiq’s Science of Retirement conference today (1 March)

The FCA does not want advisers to act as “order takers”, its IFA technical specialist has said.

Speaking at Finalytiq’s Science of Retirement conference today, Chris Hewitt urged advisers to question the client’s motivations behind their request before transacting any business.

He said: “We do think advisers shouldn’t be order takers. If a client comes in and says, okay, I want to have my pension, it’s probably not a great outcome for advisers to do that no questions asked. Part of advisers’ role is to challenge clients and understand what’s driving that decision.”

Hewitt said that the aim of the adviser should not be to be “confrontational”, but to help clients make more informed decisions.

Hewitt said: “We do recognise with the introduction of freedom and choice, quite a few people now see pensions in a different way, as just another tax efficient savings vehicle that can be used for a wider range of objectives.

“For a lot of consumers there are going to need to be compromises on how they use their assets, pensions included…There’s a key role for advisers.”

“It’s really important to get those good quality client objectives at the outset, really understand what the client is approaching you for.”

Insistent client issues

However, Hewitt said that when it comes to the issue of insistent clients who wish to transact against advice, dealing with these recommendations was a “commercial decision” for the firm, as long as they made the risks clear and documented that the client was acting against advice, as per the FCA’s guidance.

Hewitt replaced Rory Percival one of the key FCA liasons for advisers in October.

Hewitt was a lead associate in the FCA’s investment intermediaries department, and worked in financial advice before joining then regulator the Financial Services Authority in 2010.

Hewitt, who is level four qualified, has been involved a number of thematic reviews around risk profiling, centralised investment propositions, investment advice at banks and RDR compliant adviser charging.



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There are 30 comments at the moment, we would love to hear your opinion too.

  1. So is this the beginning of the end of focused advice I wonder? It is all fair and good in FCA Utopia-land to say we should not be order takers however if a client comes to me (especially at this times of years and says “Marty the misses and I want to max out on our ISA allowances and nothing else”. If the client’s have read and understood my proposition, see I offer full or focused advice services along with what defines them and they say “Perfect, focused is what suits us”. Just what on earth does the FCA think goes on in the real world or how it operates? Is the FCA seriously now saying that every client must pay for full advice, regardless of their objectives?Do they seriously expect us to take the time, effort and go to the expense of providing the “FCA -LaLa land” full service but only get paid for focused service? I think not, the FCA should seriously consider going and doing one here. Why should any client be forced into paying a higher fee for something they do not want? The full advice service is a lot more expensive than my focused one. It boils down to transparency, choice, what the clients wants us to do and what they are willing to pay. Like a lot of other (and former) FCA staff, this guy is in serious cuckoo land.

    • No, all they’re saying is you need to guide and give advice not take orders. focused advice lives on, but it’s focused advice not limited information. If a client came into you and said I want to buy into an unregulated Brazilian rain forest please, you wouldn’t take the order and do as he asks as you may feel it really isn’t a good idea or suitable for that particular client. Same in the example of a client coming in and for example saying I want to take all my pension as one cash lump sum. I’m sure you’d feel it was your duty to assess, and then guide and advise the client accordingly.

    • Hampshire Yokel 1st March 2017 at 3:41 pm

      I think you need to re-read the article.

      In my reading of it, it is simply a case of saying a professional adviser (the key word being adviser), should seek information about a client’s circumstances and objectives before doing their job and advising them about a course of action.

      There has been a suitability requirement for transactions for a long time now and, without asking questions, you would be unable to demonstrate suitability.

      Nothing in the article inferred your advice cannot be focussed upon an individual need.

      If you don’t want to advise, get a job that doesn’t require you to provide advice.

      Quite simple really.

      [Pseudonym used as I work for a large financial services business and am not permitted to publicly comment in a manner which may link my views back to my employer, who may not share my views].
      30 years experience in financial services industry, including 6 years as an adviser, before a ‘temporary’ move into compliance, which has so far lasted almost 25 years and included time with product providers (3), an IFA network, the PIA, the FSA, an IFA support business and a bank.

  2. I have to turn away loads of insistent clients for commercial reasons. My number is similar to an Indian take away restaurant and the last guy asked me for a chicken bhuna, mushroom rice and 3 spicey papadums.

    • Hampshire Yokel 1st March 2017 at 3:43 pm

      Could you act as an introducer appointed representative to the Indian take away, add a second income stream and use it as a lead generation system?

      • Duncan Disorderly 1st March 2017 at 5:22 pm

        But then he could be held responsible if the take away poisoned his client – unless he had done his due diligence, checked out the food as well as the preparation

  3. This is an issue with DB transfer advice. There is a growing trend of offering a client a choice between death benefits or guaranteed income and letting them make a choice without much in the way of advice. There’s ultimately a choice to be made, but it has to be a very well informed one.

  4. The issues are many, the solution is complicated, the outcome is known and the FCA will have no say. It is the FOS that will sink the advisers. So you advise the client not to transact a DB Transfer, to wait until NRD, Gilts rise and the transfer value halves. Client then complains that your advice has made them worse of and refers to the FOS. You took a fee for providing that advice, which they will then state makes you liable as your failure to transact and recommend. That you should have seen that Gilt Yields could have risen, the FOS will apply the same argument they currently apply to past DB transfers transacted when CETV’s in todays terms were very low. If you do not think that by taking a fee and either refusing to transact or failing to recommend protects you, you are incorrect. Mark my words, which ever option you take, not to transact, transact, insistent client, the FOS will find a way to justify your fee makes you liable. Unless you have documented every possible outcome you most likely will fail to fight any claim.

    • Hampshire Yokel 1st March 2017 at 3:46 pm

      Investment growth (or lack of it) should not be permitted as cause for a complaint. If your advice was sound, the fact that it led to reduced benefits is not your fault, as long as you explained the options and the pros and cons of each during the advice process.

  5. Well the FCA I thought was trying to make the IFA take orders. Oh sorry that’s just from the FCA, who has a statute of limitations of only 1 Year for complaint against them. Even thought the adviser is on the hook for life. The complaints commissioner is on the side of the FCA also the FSCS, neither one will criticize the other because they are all in the same side. What a load of ——-s

  6. “We do think advisers shouldn’t be order takers. If a client comes in and says, okay, I want to have my pension, it’s probably not a great outcome for advisers to do that no questions asked. Part of advisers’ role is to challenge clients and understand what’s driving that decision.”

    As a left field take on this it seems to me that there is a principle involved here. Does it also apply to investments and other advice or are expected standards higher for pensions? Surely it applies to other advice too. If that’s the case then it would be interesting to know how robo-advice could ever reasonably “challenge clients and understand what’s driving that decision”?

    • Hampshire Yokel 1st March 2017 at 3:49 pm

      In my opinion, it should apply to every aspect of your work. Remember, the FCA chap was referring to IFAs. The ‘A’ in IFAs stands for adviser, not order taker. Even if you are taking instructions from a client, you have a responsibility to confirm suitability.

  7. I think the FCA is spot on with this. Working the transactional model has been far too prevalent. It is assumed (or should be) that we know more than the client. Therefore in the above example of “I want a pension” a good adviser will ask a multitude of questions. (NOT just a fact find) For example. What about your AE? How much were you thinking of contributing? What is your tax rate? If you don’t pay HRT is it really worth it? Have you considered an ISA instead (tax free income later). Do you have any debt? Perhaps it would be better to pay this down or redeem. Perhaps even a buy to let might be an option. And so forth.

    It should no longer be the case of seeing a customer and saying – “You should have a pension/ISA etc. – sign here – we take 3% upfront and 0.5% ongoing”. It should be more of a case of charging for the advice, irrespective of any product.

  8. Hewitt was a lead associate in the FCA’s investment intermediaries department, and worked in financial advice before joining the regulator the Financial Services Authority in 2010.
    clearly a failed adviser so gets a job at the FCA hope for us all

    • Hampshire Yokel 1st March 2017 at 4:17 pm

      Why a failed adviser?

      You have no idea how long he was an adviser for, how successful he was or why he chose to take a different path.

      I was a (relatively) successful adviser for a little over six years. I earned more as an adviser than I did in the roles I did for the following three (maybe more) years. I only ceased being an adviser because the company I was with was taken over and I didn’t like or respect the new people in charge, even though I was one of the 10% or so that were asked to stay on.

      Rather than leap into another advisory role quickly, I decided to have a ‘time out’ and consider my options. During this time, I took a short term role in a newly established advice quality checking department of a major life company.

      Whilst I still intended on returning to an advisory role and looked at various options over the following 12/18 months, I ended up remaining in the compliance field ever since.

      I wasn’t a failed adviser.

      You’ve made assumptions about this chap which, unless you have personal knowledge of him, are rash and possibly inaccurate.

      Having worked with hundreds of IFAs over the last 20+ years, I would say the vast majority of the ‘good’ ones would take no issue with the article.

  9. Usually failed advisers get a job in compliance this is just the next level. I guess it must have been a spectacular failure!

  10. Very well said Harry. Clients often need to be challenged on their own thoughts and perceptions. Why crystallise their pension when £100k is sat in the bank? Why use flexi-access when they have a large value estate and ISA’s/investments which could be used before the pension? Advisers must be prepared to offer a contrary view where necessary – this is where soft skills come to the fore.

  11. You cannot be serious 1st March 2017 at 5:03 pm

    It is not fair to say compliance people are failed advisers, they are Advisers who have lost the ****s to advise on a face to face basis with the public and then sit and hide behind a desk just judging Advisers who do have the balls to deal with the public on a face to face basis.

    Most of the advisers who were successful 26 years ago did it off the back of their collecting books and did not have to write suitability letters so now were in the real world again.

  12. @ Hampshire Yokel
    As you are providing sound comments on this, what is your take on the client who has been paying us for “servicing” his pension contract, but who is now fed up (may complain) with us because he “asked” us to administer a hefty one off withdrawal for him and (in line with MR Hewitts thoughts) we have said we cant just do it without more information. We know hes desperate for the money but we suspect its probably for something utterly frivolous (our view not his – he gambles) and its the only pension hes got and this would be est 15% of it.
    In his eyes we are earning money from his plan to provide, among other things, a service to him which should include helping to administer things he wants done. It is his money after all!!
    Damned if we do…damned if we dont??

    • Paul, surely the answer is relatively simple to this, IE comment on the sustainability of such withdrawals. Check other sources of income, comment on if there are any and if so, why not been used in the suitability letter. Obviously you do not want this chap to fund his gambling habit but at the end of the day it isn’t up to the adviser to decide what he spends the money on, we can only advise not force.

  13. Trevor Harrington 1st March 2017 at 5:37 pm

    Well well well …
    Here we are still arguing the concept of “Know your client” …
    and “advice only in the clients best interests” …
    I have been in this profession since September 1981, and resolved this issue for my own professional integrity and personal sense of moral responsibility … in late October of that same year …
    if you are having problems with these issues, you either work for the wrong company … or you should not be in the profession at all.

  14. This would suggest that if a client wants to transfer a DB scheme which clearly should stay where it is then we should not take orders from the client.

    If the FCA are backing us on this we can refuse to transact and not be subject to a later complaint if circumstances change and the client or their heirs would have been better off, death benefits etc. My worry is that we say no, do not get paid, but are still liable for the ” advice” It should be the right of any business to refuse to do business, shops, restaurants, clubs etc have the right to refuse to serve anyone they want, so we should be able to do the same. If I say no then it does not stop the client from finding someone who will say yes.

  15. Well that simple, straightforward bit of guidance stirred up a hornets nest of contentious reaction!

  16. I find the comments about ‘failed adviser’ to be (a) stepping over the line (personal attack), (b) unprofessional, (c) arrogant and (d) factually incorrect. Chris Hewitt is not a failed adviser, he is an extremely successful regulator who has risen in the ranks due to a very high level of competence, hard work and excellent judgement. He has a direct knowledge of the advisory world both from previous experience and supervising firms for many years (don’t forget supervisors have excellent understanding of the advice process and advisory firms as they are dealing with them on a daily basis).

    BTW welcome to Hampshire Yokel, presumably new to the comments section. Sensible comments.

  17. I only “order take” when what the client wants to do coincides with what I recommend they do. Surely if that isn’t the case then you aren’t actually providing financial advice (independent or otherwise) and deserve the consequences. When an architect comes round to help you build an extension they will look at the dimensions required and the materials to be used. They will probably ask you what will you use it for /the likely activities you will undertake there. He or she will then provide the benefit of their professional opinion of how it should be undertaken. Certainly there may be some minor adjustments after discussion on the plans with a client, however If a client tells he or she that they are wrong and then suggests it is best to instead build an igloo as an appropriate extension then as a professional if they agreed then this would be shocking.

  18. In this instance of pension freedoms and the (misnomer) of what we have come to term as “insistent” then I have to agree….

    The old adage of “he told me to do it” does not wash, even with all the disclaimers….. we know the only people who can make a disclaimer stick in this business is the regulator ! I find it quite alarming the regulator is sticking with the caveat of “going against advice” (in this particular instance) as acceptable, I think this is very irresponsible when you consider FOS and the way they will judge it !

    There is a very simple solution, ask the questions and if you don’t get the required answers, (remember there is no such thing as an insistent client) politely decline to transact…….. odds on their mate in the pub has told them what they need to do, or they think they can do it on the cheap !

    Off they go to the nearest “non advised” port………. and there is the huge white elephant in the room.

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