That is not enough, though, given that clients may not be accustomed to dealing with complex financial information.
The guidance places a responsibility on the firm, however, to ensure the process is a two-way street.
The regulator suggests that firms should obtain an acknowledgement from the client that the transaction is not in accordance with the firm’s recommendation and that it is being carried out at the request of the client.
This needs to be in the client’s own words, to make it clear that the client is not just signing another piece of documentation that may be indistinguishable from the rest.
Advisers must then ensure they keep a record of the advice and process followed, including their communications with the client, and the acknowledgement from the client that they are aware that the transaction is contrary to the firm’s recommendation and is being progressed at the client’s request.
There is further back-up.
In its pension transfer rules published in October last year, where advisers are now required to produce a suitability report, regardless of whether they are transferring or sticking with the scheme they are in, the FCA says that where a client is advised not to transfer, the suitability report provides them with “a lasting record of why remaining in a safeguarded benefits scheme is the most suitable outcome for them”.
Know your client inside out
While the FCA’s guidance, rules and three-step process provide a clear steer for advisers, there is much more involved in managing an insistent client, as Frank Morton, a director at Phil Anderson Financial Services, in Aberdeen points out: “With all due respect to the FCA’s three steps, it all comes down to the adviser’s relationship with the client.
“These situations go beyond the normal ‘know your client’ rule. You have to take your time and remember that they are in completely foreign territory.”
Mr Morton also reports that the firm works to its additional own steps for managing insistent clients, which include stress-testing the client’s understanding, reaffirming the adviser’s position; asking if there is anything missing from the conversation, that they might not have mentioned; and showing empathy.
Other advisers are building in their own checks and balances too – in some cases to filter them out from the start, as David Hearne, director and wealth management adviser at Satis Asset Management, explains: “Our client onboarding process is extensive; it typically takes us a year to engage someone – we work with people who want to delegate management of their financial affairs."
