The second step suggests that it should be clear to the client that their actions are against your advice. And finally, advisers should explain to the client what the risks of the alternative course of action are. If the client does decide to go ahead, advisers must clarify that this was not their recommendation.
The FCA further states that, while there are no rules specifically in relation to insistent clients, an adviser must follow the normal advice rules, such as obtaining the necessary information about the client and their investment objectives, financial situation and knowledge and experience in order to make a proper recommendation.
“Both the FCA and the Financial Ombudsman Service (Fos) have been clear about the process,” says Jane Hodges, a chartered financial planner at London-based Alexander House Financial Services. “Some advisers believe they should get a ‘free pass’ and somehow the FCA/Fos will not make them accountable for giving advice or allowing insistent customers when it comes to pension freedoms and transfers. I don’t think they are listening to what they are being told.”
She suggests that many advisers have in the past tried to use insistent client rules to circumnavigate their advice liabilities and have instigated and influenced this action. “My tip – just record the meetings, it is easy to see who drove the process and instigated the insistence,” she says.
Not all advisers think the FCA is doing its job in countering this. Christopher Foster, a chartered financial planner at Pennines Independent Financial Advisers in Oldham says, “I have encountered many obvious ‘rip-offs’ over the years, all using the insistent client route. In some cases there has been sufficient evidence for me to report this to the FCA. In every case the FCA seemed to be very slow to act.”
The regulator’s current thinking is unclear. A member of the media team says, “We have asked about insistent clients in our recent consultation on pension rules – it is too early at this stage to say what the result of the consultation will be.”
This consultation paper, published in October 2015, invited advisers’ views on rules around insistent clients. The paper aims to gather recommendations for greater clarity around the issue and also find out the extent to which professional indemnity (PI) insurance is a barrier to undertaking insistent client transactions. The consultation came to an end in January and the FCA will publish its findings in Q2 of 2016.
“Both the FCA and Fos have made it clear that as long as the process outlined by the FCA is followed to the spirit, not just to the letter, then advisers and therefore PI Insurers should have nothing to fear,” says Ms Hodges. “If the industry worked together to address the main principles of proactive advice so everyone understood what good advice looked like, this would help far more as we would be advising our customers with confidence again and not hiding behind insistence.”
