Mr Morris also points out the importance of the client’s involvement in demonstrating their understanding, or lack of it.
As he says: “The next crucial point is that they need to obtain from the client written acknowledgement that they understand that they are being advised not to go ahead and acknowledgement of the client’s understanding why.
“They also need an explanation from the client as to why they are proposing to proceed, regardless.”
Mr Morris also emphasises that the wording should not be dictated by the firm: “Fos would want to see an email or letter which is clearly from the client and to see that they have not been ‘spoon fed’ by the adviser.
“My understanding is that the ideal scenario is one where the firm says to the client, ‘we want you to write to us and tell us what your understanding of our discussion was’. This might flush out misunderstandings on the client’s part.”
He adds: “I have some sympathy with those who say the only way to protect themselves is not to carry out these transfers at all. I’ve seen cases where it’s been said the client didn’t understand, when in my opinion they did understand, and were genuine insistent clients.”
Summing up, Mr Morris says that proof is paramount when it comes to insistent clients and DB transfers: “You need lots of clear evidence, in the client’s own words and own hand, to say why they are proposing to go ahead.”
Insurance dilemmas
Enhanced knowledge, solid guidance and clear communications are not, however, always enough to protect advisers from insistent clients.
Professional indemnity insurance is a requirement too, but due to exclusions and limitations, following the Fos increase in compensation levels, this traditional source of protection is currently shrinking.
Looking at the practicalities of what IFAs can do in the circumstances, Rhiannon Bates managing director of The Risk Factor, says: “It all comes down to the choice of taking the risk.
“Smaller firms probably just can’t afford to take the risk of advising insistent clients, so their protection is to let them walk away, while maintaining run-off cover for historic cases, and perhaps seeing if they can negotiate long-term agreements with their insurers to make future premiums more predictable.”
Fiona Nicolson is a freelance journalist
