The Financial Ombudsman Service seems to have reduced the insistent client debate to a selective and capricious interpretation of the “client’s best interest” rule. That is useful for the FOS, of course. It enables it to oil the wheel that squeaks the loudest by ordering placatory handouts at advisers’ expense. The FCA is also a beneficiary. It sooths those who would otherwise complain about failed regulation. Likewise, politicians benefit in their turn by not having to face disgruntled investors at their constituency surgeries. The result for advisers will be increased professional indemnity insurance premiums and excesses combined with yet more exclusions. PII will be made ever more useless, leading to more failed firms. Higher Financial Services Compensation Scheme levies will then follow as it dispenses its own largesse.
Free societies allow their citizens to act in ways that others may regard as unwise. At one end of the scale we are free to eat, drink and smoke too much, have unprotected sex and fly microlight aircraft. At the other end, the same freedom allows the likes of Ultimo founder Baroness Michelle Mone to ignore the advice of those who told her a dyslexic working class Glasgow girl stood no chance of dragging herself and her family out of poverty by creating a lingerie empire. Wing Commander Andy Green has probably had to ignore equally well-meant advice in his mission to drive a rocket powered car at one thousand miles per hour.
The freedom to choose to ignore advice extends into financial matters. The Government exhorts us to save and gives us incentives to do so but we can still opt-out of automatic enrolment and blow our savings on a world tour if we choose instead. Nobody can compel us to take their advice to the contrary no matter how sure they are of its rightness.
Defendants go through the courts on a daily basis pleading contrary to their legal advice and suffer accordingly, but there is rightly no sanction against the lawyer who, acting on his instructions, presents a hopeless defence to the best of his ability. An accountant may tell his client that his business exporting Blackpool sand to Saudi Arabs is mad, misconceived and doomed to fail, and that he should cut his losses and quit, but if his advice goes unheeded he will suffer no penalty for continuing to do his client’s books until the day the liquidators march in.
The insistent client has been around for as long as advice of any kind has been a purchasable commodity. No other profession to my knowledge, however, suffers to any great degree from the exercising by its clients of their freedom to choose to ignore, in whole or in part, the advice they are given. Only the financial adviser and the advice he or she gives is treated differently.
The FCA, FOS and FSCS need reminding that the “S” in Sipp stands for “self”. If a client demands an adviser limits his or her advice to finding a suitable Sipp that will thereafter allow him or her to select his own investments, however crazy any of us might think them to be, that is the client’s prerogative. If the regulator disagrees, then it needs to look to the list of permitted investments and compliance by Sipp providers.
Neil Liversidge is managing director of West Riding Personal Financial Solutions