Insistent Client Process

As you are aware, ALIFA has previously taken a cautious stance around insistent client transactions. However, following Dale’s positive discussions with the FCA and FOS, we have now decided to introduce processes to assist firms who wish to facilitate this type of business. Before proceeding however, you should check with your relevant PI provider that they are happy for you to transact insistent client business and consider any limitations they may place on cover etc

Following recent FCA guidance, more stringent processes will need to be applied to compliantly transact insistent client transactions. Irrespective of this, where a client’s request is considered extremely poor or too risky, we suggest you do not transact or facilitate the business, even for an insistent client (e.g. DB transfers where critical yields are un-attainable and no real need recognised to transfer etc). However, where the clients request is deemed by you to be logical and reasonable, albeit not what you might recommend, the 3 stage Insistent Client process below should be followed.

NB: The FCA have stated that firms should record all insistent client business, as well as rejected insistent client business.

Stage 1

Full normal advice process adopted – Fact find, assessing ATR, research etc, and issuing a suitability letter based on your recommendation.

Stage 2

Client rejects your advice and wishes to proceed on an alternative course. You will need to obtain clarification in writing from the client (if via telephone call, a full record noting the clients specific request will suffice) detailing the following:-

Reason for rejecting advice

Awareness of risks associated* with this course of action

Confirmation of why the client wishes to proceed with the course of action

*Risks associated with the action may include:

Penalties on encashment/transfer/switch

Reduction of future benefits

Loss of existing/future benefits (death benefits, guarantees, bonuses etc)

Depletion of retirement funds/income

Lack of financial protection

Liquidity risks

Advisers will then need to contact the client to discuss and record the implications of taking this action. Also, to allow the client time to re-consider, a final letter (Stage 3) should be sent after 5 working days have elapsed.

Stage 3

A final letter to the client clarifying that you are acting on the client’s insistence and confirming the product, provider and fund choices or the drawdown of funds if in a pension scheme. This should also include the risks associated with the instruction. If it relates to the drawdown of a pension fund, it should make specific reference to:

Taxation

Sustainability of income

Impact on state benefits (welfare & social care support)

State Benefit means testing – deprivation of capital

The following disclaimer should be added to highlight the potential loss of regulatory protection:-

“For the reasons I have outlined previously  I  do not recommend that you invest in XXXXXXXXX, and due to the associated risks I believe it is not likely to be in your best interests. However, if having fully considered all the issues involved, you still feel that you wish to proceed, we can only act on the matter by treating you as an “insistent client”. This means that we will proceed with your explicit instructions and no liability will attach to either myself or IFA firm in respect of this transaction. You have chosen not to accept my original recommendation and you should be aware that by proceeding on your specific instructions you may not benefit from the protection of the Financial Conduct Authority on assessing suitability, or from the Financial Ombudsman Service. If this is your intention, please sign and return the enclosed copy of this letter as your acceptance and understanding of its contents”.

 If you are unsure on any aspects of this process or have any questions, please let me know.