FCA outlines poor practice when advising insistent clients
The FCA has this morning told advisers what it considers to be poor practice when advising insistent clients.
The regulator has outlined examples of good and bad practice in a new factsheet, which it said would be a “helpful reminder”, following the pension reforms.
Officials said in the document: “Although there are no rules specifically in relation to insistent clients, you must follow the normal advice rules first.
“So you must obtain the necessary information about the client and their investment objectives, financial situation and knowledge and experience so as to enable you to make a personal recommendation which is suitable.
“You must also act honestly, fairly and professionally in the best interests of the client.”
Good practice included ensuring information gathering was bespoke for the client, and not restricted by the limitations of a narrow process or template approach.
Ensuring omissions, inconsistencies and anomalies were followed up, resolved and documented to create a full record of the facts on which the personal recommendation was based was also highlighted as the correct way to go about advising insistent clients.
Poor practice, however, included a client not being given any information about how to get debt counselling or loan restructuring advice.
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The FCA’s Handbook does not refer to insistent clients and there are no rules or guidance specifically about this, it said.
But it outlined the following three key steps when advising an insistent client:
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.
The regulator said that if the advice includes a pension transfer, conversion or opt-out, there may be additional requirements.
These include ensuring the advice is provided by or checked by a pension transfer specialist, comparing the defined benefit scheme with the defined contribution scheme and starting by assuming the transfer is not suitable.
The factsheet is available via the FCA’s website.