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FCA issues adviser guidance on insistent clients

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The FCA has set out its concerns about insistent clients in further guidance to advisers on the issue.

Last week, FCA chief executive Martin Wheatley said the regulator planned to issue further guidance to advisers on how to deal with insistent client pension transfer requests.

The issue of insistent transfers has divided the industry following the introduction of pension freedoms in April.

People with defined benefit pensions worth more than £30,000 who want to take advantage of the new flexibilities are required to take advice before transferring to a defined contribution scheme.

Advisers have been seeking clarity on whether they could be held liable for losses if they process a transfer following a negative recommendation.

In a factsheet for advisers published today, the FCA says it has seen insistent client cases where there was an inadequate assessment of the other options which would meet the client’s objectives.

It says it has also seen cases where “excessive” numbers of insistent clients resulted from the advice not being clear, and where the risks of the client’s preferred course of action were not clearly explained.

In addition, the regulator says it has seen examples of where the insistent client process was a “papering exercise”, and where the adviser advised the client not to transfer and then recommended an unsuitable product after the client insisted on transferring.

The guidance says there are three key steps when advising an insistent client: provide suitable and clear advice, make it clear to the client that their actions are against your advice, and be clear with the client what the risks are of going ahead.

It says the second and third points can be set out in the suitability report or elsewhere.

The FCA says: “You must ascertain the client’s investment objectives before making a recommendation. A request or preference by the client for a particular solution – for example accessing cash from a pension – is not an objective.

“You must ascertain the client’s actual investment objectives so that you can advise on a suitable course of action to meet them.”

It cites as an example of good practice an adviser who explores clients’ “real need” for accessing cash, and where driven by debt repayment directs the client to the Citizens Advice Bureau.

Another example of good practice given by the FCA is the client stating in their own words why they wish to act against the advice.

The regulator says insistent clients are “unlikely to be common”. It says it is up to firms how they charge for insistent clients.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 8th June 2015 at 12:03 pm

    I see nothing here to alter my stance towards insistent clients. Go see somebody else.

  2. Duncan Carter 8th June 2015 at 2:09 pm

    I have no issue with almost all of this except the referral to CAB where a client wishes to access funds to repay debt. In the long term, debt is likely to cost more than returns from an investment which are not guaranteed in any event whereas the interest rate will be certain. If the person has no other assets and wants the peace of mind of being debt free (not an uncommon situation) what else is the CAB going to suggest? Extending the term, an IVA, borrow from family or friends?

    Thinking laterally for a moment, if a client turns up wanting to boost their pension by paying £10K into their plan but has a £10K debt, best advice has to be to repay the debt first then use the repayment savings to bolster their pension. By this determination however such advice would be debt counseling and would need to be referred to CAB.

    A further thought is what if wasn’t a pension but say an ISA or a Building Society account – a pension is in most cases (leaving aside DB schemes) a pension is just another investment.

  3. It does make me wonder…… what qualifications and “relevant” experience (more important IMHO) do these people have ?
    Here we have another salvo of guidance to go with all the other guidance and rules, probably written by people who used to be in the industry 10 yrs ago ?

    Still…… more important things to think about; I have a bit of a headache, I think I will go see my greengrocer to crack my skull open to have a look !

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