Insistent Clients

Firstly, the FCA rules do not refer to insistent clients. It is recognised however that occasionally, clients may want you to facilitate a transaction against your advice. When a client does this they are commonly referred to as an insistent client.

The FCA outline 3 key steps for facilitating such transactions, namely:

  1. You must provide advice that is suitable for the individual client, and this advice must be clear to the client. This is the normal advice process.
  2. It should be clear to the client that their actions are against your advice.
  3. You should be clear with the client what the risks of the alternative course of action are.

Where the advice includes a pension transfer, conversion or opt-out, there may be additional requirements (see our related article here).

Step 1 above is important. You must follow the normal advice rules i.e. gather KYC, analyse requirements, make a suitable recommendation, issue suitability report, etc.

Please note that a request or preference by the client for a particular solution – for example accessing cash from a pension – is not an objective. It may be a solution, but it is not an objective. We often see vanilla type objectives like this in client files and they don’t meet the requirements detailed in COBS 9.3 (see here).

You must ascertain the client’s actual investment objectives so that you can advise on a suitable course of action. In this example, what does the client want the cash for and why? This is important.

Your file should include an assessment of all potential options considered for the client. It should not be an ‘order taking’ exercise that could result in advice not being in the client’s best interest.

If a client does disregard your advice and insist on another solution, you should make the reasons why and risks associated with their chosen action clear. We suggest highlighting them in your suitability report.

The FCA quite rightly highlight that ‘it is unlikely to be common for clients who are seeking advice to disregard that advice’.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

Insistent clients should be the exception rather than the norm. You may decide that you will never transact such business. However, we do anticipate a potential increase in such transaction following the pensions reforms.

It is important that you strictly follow the 3 steps above. You can’t shortcut this process. As such, you need to charge proportionately; otherwise you should walk away and not facilitate the transaction.

Insistent client ‘advice’ is a potential high risk area.

Action Required By You

If you allow insistent client transactions you should:

  • Read the fact sheet carefully here;
  • Note the good (and poor) practices and assess yourself against these objectively;
  • Implement a clearly defined documented procedure that includes a pre-sale compliance ‘sign off’;
  • Ensure your PI insurer knows that you may undertake such business (please note that if it is excluded from your PI policy you will be liable for the full claim and will have to hold additional capital resources);
  • Clients should discuss any issues directly with their nominated ATEB consultant;
  • Alternatively contact us here.
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About the Author

Steve is an ATEB Director and has a deep understanding of all matter regulatory, built up over his 30 years + in the industry. With a training background and a technical brain, he overseas numerous complex projects and client implementation work.

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