View more on these topics

PFS warns Govt and FCA over ‘insistent client’ misselling risks

The Personal Finance Society has urged the Government and the FCA to introduce new rules which safeguard advisers against future misselling claims from “insistent” clients.

PFS chief executive Keith Richards says it sensible the Government has mandated advice for those wishing to transfer out of a defined benefit pension worth over £30,000 in order to access the new pension freedoms. The Government is also considering this requirement for people who want to cash in their annuity from April 2016.

But Richards adds: “Where the advice is not to transfer, the Government has confirmed people will still be at liberty to ignore it. This places advisers in a compromised position, as many will not be prepared to facilitate an insistent client transaction which goes against their professional advice. Those who do, will be party to arranging an unsuitable solution and might be deemed liable in the event of a complaint.”

The PFS chief executive is calling for those who ignore advice to be excluded from qualifying for redress against the adviser or the Financial Services Compensation Scheme.

Richards says: “If the Government wants advisers to help implement greater consumer choice, we are calling for an urgent change of policy in recognition of the risks this represents to both the public and the future reputation of the advice profession.

“Caveat emptor must become a recognised component of the insistent client process. Until that happens, advisers should not get involved in unsuitable facilitation without being protected. It benefits neither them, the profession, nor the public we are here to serve.”


News and expert analysis straight to your inbox

Sign up


There are 8 comments at the moment, we would love to hear your opinion too.

  1. Christine Brightwell 30th March 2015 at 9:12 am


  2. I would like to believe that common sense would prevail and advisers would not assist clients that go against their advice, however in the real world I suspect this will occur when the wrong pressures are exercised. It would seem that the adviser must make this crystal clear to the client that they are simply assisting the client in their free choice, not adivsing them and therefore not responsible for the consequences. I welcome the PFS initiative to effectively set the tone and precedent for this by protecting advisers, (who are in turn protecting the clients from themselves) not only against spurious complaints, but the time that they waste in defending them.

  3. The Govt could establish an insistent client clearing house similar (or perhaps even use) NEST to receive payments from insistent clients which can then be held in any NEST fund (but nothing other than that) and drawn down as cash for flexible access drawdown.

    If the consumer then wanted advice on where to place the monies AFTER failing to take the advice to stay in the DB scheme, then that would be a separate issue and would draw a line under the insistent client issue both for advisers and for reliance on the FSCS.

    Personally, as a firm, I feel there is (currently) an advantage in NOT having AF3 or transfer permissions at present as we cannot be bullied in to effecting a transfer by an insistent client even if we wanted to!

  4. How many times would we help a client to invest in something that we say is bad for them???? Example invest in funds that are too risky for them. I think the answer is overwhelmingly we wouldn’t. I don’t understand then why we would help those who insist they want to take the freedom option on a DB scheme. For once I whole heartedly agree with PFS on this occasion, we need to get this issue resolved so that in the event the client insists on doing it, despite all the warnings given that advisers are not held liable. As sure as night follows day there will be complaints coming in. The FOS stance is not exactly helpful in this situation in saying what it did about future complaints. That having been said it should make it 100% clear as to what WILL happen if a DB scheme is transferred for cash and a complaint comes in. Explain to the client before you start the process that you will not transact the business for them if it turns out not to be suitable but that we will need paid for the work we do to find out. Hopefully they will agree to this and there is no problem, or they will not want to pay if the advice is to stay put and they walk way. Again – no problem.

  5. “simply assisting the client in their free choice” is highly unlikely to be accepted by the FOS as an adequate defence. The complainant, very probably egged on by a CMC (just sign here, we’ll take care of the rest), will claim that he didn’t understand the implications of what he was doing, that the adviser didn’t make sufficient effort to explain those implications to him, that the report with which he was provided was beyond the wit of any non-expert to comprehend, that the disclaimer he signed was presented to him as “just a formality” ~ you name it, he’ll claim it because if there’s a chance of screwing somebody else for the consequences of his own folly, he’ll go for it.

    And the chances are that the FOS, which has already stated that it doesn’t recognise insistent client as an acceptable mechanism by which an adviser can abrogate responsibility for ANYTHING, will very probably accept his version of events. So, from anything that could come back later to bite you on the backside (and your wallet and your PI insurability), steer well clear. I’m not in the business of helping people do the wrong thing.

  6. I agree with this, we are continually being placed in to impossible positions and then expected to compensate for others.

    There is a fact of life that many will go against our advice, but then do you throw them out the door to the waiting scams and fraudsters, or implement the correct product to meet the need of their wishes and their goals.

    I personally would never move from a final salary scheme only in very defined circumstances, but their are consumers out there that will. Having supplied advice against moving, is it then correct to throw them to the wolves, or should I be able to implement an arrangement?

  7. So, if a client has a DB pension that is funded and they wish to access the cash rather than take the scheme pension, there must be a reason. There can be a number of instances where the cash equivilent sum needs a huge percentage growth in order to match the scheme benefits, therefore qualified advisers may feel it should not be recommended. However, taking some or all may suit the client as the flat rate state pension plus some additional income may be perfectly sufficient to fund their lifestyle at age, say 75 upwards. As the typical spending patterns post retirement look as if they are high for the first 5-10 years, then lowest later on, then possably rising again if long term care is needed. LTC is not needed by the majority of people during their lifetime, avarage staysare normally only a few years, however there are exeptions.
    During my 24 years as an adviser I have often come accross pensioners with generous DB pensions that do not spend anywhere like their total income, but can only make regular gifts from income to reduce IHT. If these people took the cash from their DB scheme, they could sort out, with your help, a more personalised income to suit their proposed lifestyle, even if the cash equivilent represented poor value. From my point of view, as long as it is all documented, the loss to the client made quite clear and they agree, why would you need the insistant client rule anyway?

  8. The FCA guidelines allow Pension Transfer Specialists such as myself some latitude in terms of obtaining contemporary evidence that a transfer is in the best interests of the consumer.

    This means that each individual case is likely to have merits and disadvantages, the skill is to reach the required solution without causing financial damage to the consumer. I have approved DB transfers for seriously ill clients, professional investors, single people with unhealthy lifestyles etc, all based on my judgement of the case and the best outcome for the client .

    An insistent customer in my book is one where having explored all options, I cannot find any valid reason why a transfer should be allowed and the consumer disagrees with my decision. This should be in a minority of cases, although I do accept that the publicity regarding pension freedoms is likely to stimulate more transfer enquiries and the ratios may change.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm