If you insist…

25 October 2017

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We consider the progress of the FCA’s Advice Unit as well as the most recent proposed guidance on insistent clients.

Advice Unit

Back in March 2016 the Financial Advice Market Review (FAMR) recommended the FCA set up a dedicated team to help firms develop and deliver mass-market automated advice models more quickly.  As a result the Advice Unit was established in May 2016.  They provide regulatory feedback to firms which aim to deliver lower cost advice, discretionary investment management services to consumers.  So far they've opened 2 tranches of applications from firms and have approved 17 requests to date.

Initially the Advice Unit was only open to propositions which aimed to cover gaps in the market as identified by FAMR, namely:

  • Pensions (accumulation & decumulation)
  • Investments
  • Protection

However it's since been expanded to also include propositions from firms in the mortgage, general insurance & debt sectors.

Firms that meet the eligibility criteria can request regulatory feedback from the Advice Unit to help where existing rules and guidance provide insufficient detail. Within the Consultation Paper (CP17/28) there's case studies along with questions from those firms within the first 2 tranches and the regulator's response.

Insistent clients

The term “Insistent client” is used to describe an individual who has received a personal recommendation but chooses to do something other than follow the adviser’s personal recommendation. The proposals in CP17/28 are designed to increase confidence for advisers and providers when dealing with insistent clients.

The guidance is a follow up to FCA factsheet 35, which proposed 3 key steps to dealing with insistent clients, expanding it to a 5 step process in CP17/28. The steps are:

  • Ensure the original advice complies with the requirements for giving a personal recommendation.
  • The adviser has communicated clearly what their recommendation is and the reasons for their recommendation.
  • The adviser clearly communicates the risk of the alternative course of action proposed by the client and why they have not recommended it.
  • A clear distinction is made between the advice that is being acted against and any subsequent or concurrent advice. This might be achieved through distinct suitability reports.
  • The adviser keeps a record of the process followed and the communications to and from the client that makes it clear that the action is against the personal recommendation at the client’s request. Best practice would be for a record of the client’s intention to proceed against advice to be in the client’s own words.

Back in August we focused on the changes to the definitions of guidance and advice ahead of their implementation on 3 January 2018. You can read this article here

About the author

Justin Corliss

Senior Business Development Manager

Justin Corliss is a Senior Business Development Manager with Royal London. Justin’s career in financial services began in his native Australia in 1997, where he worked for the Commonwealth Bank of Australia in client facing mortgage roles. Since moving to Scotland in 2002 he has held positions as a broker consultant for both Scottish Widows and Scottish Life dealing predominately with pensions. Before assuming his current role he worked as an Employee Benefits Consultant with a private firm. Justin holds the Chartered Institute of Insurance Advanced Diploma in Financial Services including AF3 & AF7.

Last updated: 25 Oct 2017

This website is intended for financial advisers only and shouldn't be relied upon by any other person. If you are not an adviser please visit royallondon.com.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.