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:
- 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.
- It should be clear to the client that their actions are against your advice.
- 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’.