Insistent clients are a growing concern for advisers across the UK. While some maintain they should be treated like any other client, others suggest advisers should ‘just say no’ or avoid them altogether.
The issue has come to the fore following the introduction of the pensions freedoms, which has led to some clients either wanting to cash in their entire pension pot or trade in a defined benefit (DB) scheme for a defined contribution (DC) equivalent in order to take advantage of the new regime. But, while insistent clients have prompted much industry debate, some advisers think the seriousness of the issue has been exaggerated.
“Most clients do not have a thorough knowledge of personal finance,” says Alan Solomons, a financial planner at London-based Alpha Investments. “They need educating and to be made aware of what other options there are and the impact of what they want to do. Sometimes what they want to do is quite sensible, sometimes not.”
He further explains that it is first necessary to understand where the client is coming from and do a factfind. “I am not going to sign a piece of paper for a fee just because they are insistent, without doing the necessary work to prepare a suitability report and express my opinion and give my advice.”
Issues surrounding ways to deal with insistent clients have been one of the top concerns for the FCA and have been addressed in several speeches by Rory Percival, the regulator’s technical specialist. However, the formal rule book does not offer any guidance on how to deal with them.
The regulator defines insistent clients as those who choose to take a different course of action from the one recommended by the adviser, but who want the adviser to facilitate the transaction.
“I’ve had to deal with a large number of these over the past 12 months,” says Kusal Ariyawansa, a chartered financial planner at Appleton Gerrard in Manchester. “In these situations it always helps to use the medical analogy: doctors do not give what the patients ask for, especially in complex situations, without undertaking a comprehensive analysis. Once people hear and understand, they usually relax and provide all necessary information.”
He further explains that insistence can be due to a number of reasons – such as need or greed. “In the case of the latter, a decline to act is easier.”
Some advisers are upfront about these cases. “I give professional advice; if someone doesn’t want to follow my advice I will not take them on as a client,” says Susan Hill, a St Albans-based chartered financial planner, adding that if something is not in client’s best interest then it is best to not do it.
While the FCA does not formally mention anything about insistent clients in its handbook, it outlines three steps for advisers in dealing with insistent clients in a factsheet in June 2015. The first step is for advisers to provide their advice in a concise manner, emphasising the need to ensure the client’s understanding of the recommendations.
