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Richard Leeson: Are we returning to self-regulation on insistent clients?

Richard Leeson

What exactly is the FCA doing? I know what it should be doing. Its website makes it quite clear its objectives are “to make sure that financial markets work well so that consumers get a fair deal. This means ensuring that:

  • The financial industry is run with integrity
  • Firms provide consumers with appropriate products and services
  • Consumers can trust that firms have their best interests at heart.”

The last article I penned for Money Marketing was on the inconsistency between the disclosure of adviser charging rules between vertically integrated firms and the rest of the market. In brief, a vertically integrated firm is not under the same obligation as an adviser firm (which is not owned by a provider) to tell its investors how much the advice costs. To date, not a dicky bird from the FCA in response, despite extensive press coverage of concerns raised by members of the public on the issue.

Meanwhile, just after that article was published, we read FCA head of pension policy Maggie Craig had said in a speech on 24 November 2015: “I know there are differences of opinion about whether you should transact the business for an insistent client. Some advisers feel you should help them make the best of a bad situation while others disagree. Our rules don’t say you should do one or the other.”

She was, of course, referring to clients who wish to proceed with transfers of their pension benefits despite being advised not to do so. But if it is not the job of the FCA to intervene to help people avoid poor financial decisions then whose job is it? Are we back to self-regulation? Unlike Craig, I am speechless.

There is an element of bias in my view, given I wrote in this publication last April just how disappointed I was that the regulator had failed to give a clear steer to advisers. Let me recap on my concerns.

A client has been told by a professional, qualified adviser that the transfer of their pension benefits is not in their interests. That client can then insist that the transfer goes ahead. However, if the adviser acts for the client in that transfer they will be in danger of a Financial Ombudsman Service complaint or negligence suit if, later on, the client decides they are worse off and wishes to pursue the adviser.

Let me return to the FCA’s own description of its purpose: “…to make sure that financial markets work well so that consumers get a fair deal. This means ensuring that:

  • The financial industry is run with integrity
  • Firms provide consumers with appropriate products and services
  • Consumers can trust that firms have their best interests at heart.”

How can the industry be acting with integrity when providers accept transfers that clients have been told are against their financial interests? How can firms be providing consumers with appropriate products if the advice given is that the product is inappropriate? How will consumers be able to trust any of us to have their best interests at heart?

Our concerns for these clients should be heightened by the vulnerability of people at this stage of their lives. Craig summed it up in these words in reference to secondary annuities:

“Many of the consumers in this base may well be more vulnerable than your average consumer. They are likely to be older and they are likely to be at a stage in their life where their cognitive faculties aren’t what they used to be.”

Admittedly, the client base is older for secondary annuities but many pension transferring clients will be vulnerable.

Personal Finance Society chief executive Keith Richards has been a lone voice in raising this issue with the FCA on behalf of advisers. He has sought clarity on how they should proceed but without success. It is time for others to join the cause: Apfa, Libertatem, the networks and nationals, as well as individual firms.

If the FCA will not take action then the industry must. If we do not tackle this and other issues, we face a future of continued suspicion from the public and pointing the finger of blame in years to come will not be the answer.

Richard Leeson is chief executive of Adviser Advocate



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There are 9 comments at the moment, we would love to hear your opinion too.

  1. At the risk of sounding arrogant, I do not allow would be clients to question my advice. They have come to me as the perceived expert, if they have a different opinion to me then why should I entertain them any further with the liability that entails?

    43 years experience and thousands of hours spent qualifying tells me I am right, as Brian Clough might have said.

    • Whilst I do agree that in the current climate this is the course any sensible adviser should take. This is only because of the threat hanging over their heads.

      To my mind, this scenario should come down to “caveat emptor”. The client has been clearly told that it’s not in their best interests (assuming no hedging has occurred), but ultimately it’s still their money and people have a right to be stupid if they so wish.

      It’s this removal of ALL responsibility from clients that’s at the heart of nearly everything that’s wrong not just with our industry, but with the world in general. Because it ignores the simple fundamental principle that YOU and only you are responsible for your actions.

      If people are protected from their own stupidity, how will they ever learn? How will they ever take responsibility for themselves…?

  2. There is a choice, as Geoff says, just don’t do it if you don’t agree!

    Easy life in a difficult world every time for me!

  3. I can see why some individuals will take the, “It’s my money – I want it now…….” approach to their pensions, however much we qualified advisers may try to persuade them otherwise. The only solution that I can see is for the government ( perhaps through the auspices of a new govt. dept. “Pensions Unwise” for example) to agree to facilitate the transfer, incorporating in the process a signed disclaimer from the client to any future state benefits other than their old age pension.

  4. Despite what Maggie Craig said, the FOS will revert to the SIB guidance, and find against the adviser irrespective.

  5. Are we ‘really’ still debating this, Irrespective of the FCA being clear or not, personally if I advise a client not to do something and they request I do the opposite, if I then go and do the clients bidding, quite simply I need my head checked.

    For the very real risk, that there is not a chance in hell your PI insurer will cover you or indeed FOS will back you

    To be fair, it matters very little what the likes of Maggie Craig, Percival or others at the FCA may say, their livelihood will never be brought into question or fines deducted their paychecks (probably why they talk in riddles most of the time) you have to look beyond the mad box of ferrets that is the regulator, and there you will find FOS and your PI insurer and as I have said, one will NOT back you and one will find every conceivable excuse not to pay out ! ask the FCA if rain is wet and you get…… Uummm well, maybe, yes well hold on, no, well you should be figuring this out for yourself,… what ever is in your clients best interests ! we have very clear guidance in our 8 foot tall rule book go read it !

  6. Long ago when I studied British Constitutional for A levels we were told that civil servants advise but ministers decide. Sir Humphrey may raise his eyebrows and say, ” courageous decision minister” but carries out the minister’s instructions to the best of his ability. The minister takes responsibility.

    The problem in the way financial regulation works is that the adviser takes responsibility for the advice. That sounds sensible but the paradox is that good advice can lead to bad outcomes and bad advice can lead (fortuitously) to good outcomes. Advising a client who is about to retire to stay in a final salary scheme is probably going to be the correct advice but if the client is knocked over by a bus the following month the advice to stay produced a bad outcome.

    No adviser can predict the course of action that will produce the best outcome and anyone who says they can should be treated with the utmost suspicion.

    I would like to see the rules change so we make it clear that we cannot guarantee that whatever we recommend will give the best result. What we can do is enable the client to make an informed decision based on their own circumstances. The client is responsible for making that final decision and accepting the consequences. To make a valid complaint they would have to show that our advice did not help them make an informed decision or we were negligent in the way we carried out their instructions.

    • i agree with you John, which is why I think written suitability reports or a client signature are as much of a defence as a chocolate fireguard when it comes to the FOS. A recordimg of the meeting can demonstrate intent of both parties as well as umderstanding and acceptance of the issues. This is why the Police have PACE. Signed confessions (like written suitability reports) have proved worthless.

  7. I really do not know why it is an issue. Agree with the client that you will do the required work to make your recommendation. You get the client to agree a fee for this work AND BEFORE you make a start confirm that if the work demonstrates that a transfer will not be in his/her best interests, you will NOT proceed any further. If the client does not agree with this, do not start any work for him.
    For those of us who have been around the block a few times in the advice community I think it is very clear that the FCA is still thinking about transfer under the “old world of pensions” as are (and will) the FoS be doing the same. Therefore the messages they are sending are crystal clear in a very muddled way but the message is “We don’t want people to do transfers because we don’t think its right. Therefore if you do it and the client complains later, you will lose (regardless of who clear your statements to them are”. Experience has shown us that history will repeat itself and we will get screwed over in years to come….. Big time

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