Dealing with the insistent client: morality or culpability?

The financial services sector breathed a collective sigh of relief at the publication of the FCA’s paper this week which clarifies its stance on how advisers will be held liable when dealing with insistent clients.

Our experience of this particular sub-set of clients is that they are wilful and can be tricky to manage. Insistent clients are just this: clients who insist on taking a different route of advice to that prescribed by the adviser.

Our role as professional advisers is most certainly not one of browbeating clients into submission; it is their own money after all. However, our professional code stipulates that is our responsibility to encourage our clients to implement financial strategies which will strengthen their overall financial position. Some people have certain ideas about what they want to do with their money even if it’s against the counsel of their adviser. If they see an opportunity for a quick fix or for a solution to a financial problem, they are not going to be deterred easily.

Before the FCA stepped in, industry commentators were busy debating our morality. And it is true - the insistent client exposed us to a moral dilemma. For instance, trying to protect our insistent clients by not giving them the transfer they wanted meant we were in danger of pushing them into the arms of vulture-types and their pop-up shops specialising in “pension-release-for-a-fee”.

However, is advising a client about transferring or not transferring his pension pot really about morals? Words such as culpability and blame come to mind. The motivations of advisers who agree to sign off DB transfers without giving proper advice must be questioned (even if they ask the client to sign caveats explaining they did not advise the transfer) and it is inevitable that the entire sector will be blamed for their foolishness.

The past bears out that a number of self-serving advisers have been vilified for taking risks with client money, and rightly so. Sadly, the past also bears out that the rest of us continue to pay for their mistakes in the form of the FSCS levy.

In the case of the insistent client, the FCA has intervened at the right time. What’s more, the rules are simple: provide advice which is suitable to the client; make it clear to an insistent client that the pensions transfer is against your advice; ensure the client understands the risks he or she is taking by not heeding your advice.

There is no doubt that retirement planning for the masses is contentious. Consumer understanding of personal finance is a recurrent problem and the retirement freedoms bring this into sharper focus. I personally think that if you take business from insistent clients you are asking for trouble. My feeling is it may be easy business at the time but how many times in the past has easy business come back to bite people.

Featured Posts
Recent Posts
No tags yet.
Search By Tags
Follow Us
  • Twitter Basic Square
  • LinkedIn Social Icon