The definition of an insistent client is as follows: “an individual who has received a personal recommendation and chooses to do something other than follow the adviser’s personal recommendation”.
Advisers do not have long to adjust with the consultation closing on 2 October, and the guidance coming into force on 1 January 2018.
Among various common sense requirements for clear communications and record keeping, the consultation suggests advisers make a distinction between the advice that is being acted against and any subsequent or concurrent advice.
It says some of these criteria might be met through producing two distinct suitability reports, while “best practice would be for a record of the client’s intention to proceed against advice to be in the client’s own words”.
Advisers, while still wary of doing too much insistent business, say the suggestion of two reports makes sense.
Wingate Financial Planning director Alistair Cunningham says: “If something is not in someone’s best interests, it is likely to be better to turn them away. That being said, there are degrees of ‘bad’ from never do this, which includes many final salary transfers to ‘on balance…’ say where cautious people who might be well served by annuity demand drawdown.
“It must need two reports. First to decide – and I’m not just talking DB transfers – what the advice is, then assuming the client rejects that advice, the specific action to take instead. In between they need to digest the first report. I’d expect a two-week delay between them.”
Phil Billingham, financial planner with Perceptive Planning, is very sceptical of advisers who have more than a few insistent clients on their books.
But he says he can see how intellectually advisers, with very long standing clients, will not want to send them to a bank and rather facilitate the transfer “protectively to see that there is less harm”.
“That is exactly the point that those advisers need to go back with the report,” Billingham says.
“Then should then say: ‘Listen Fred, we have had the conversation – I said you shouldn’t do it, you’ve said you’re going to go ahead. This is the pragmatic way of doing this with the least harm. It is still a bad idea, and I still need you to write back to me and tell me you understand that is a bad idea. I will confirm our conversation. That would then form part of the follow up report. It will be partly a ‘reasons-why not letter’ but more personalised than that. Without that sort of interaction – that last letter is dangerous.”
Billingham sees this full advice process as more than simply addressing suitability.
He says: “It is more a course of action rather than a discussion about a product or a fund. Clients can have a different of opinion saying ‘I want to use Schroders rather than Jupiter’. You could argue that’s insistent. But this is a higher-level course of action we are dealing with here. Suitability strikes me as being about a product or a fund rather than a significant switch, cash in or transfer.
“That is the level which there is the risk of client harm. The elephant is the room is all their mates have said we are transferring. They have written to the scheme and got a whole pack back, very comprehensive, been offered 50 times the underlying pension, very often reasonably low earners are being offered a million pounds – it is more money than they have ever seen in their lives. You can sit and discuss until you are blue in the face. We insist on a full advice process. We would never just sign that off.”
