On 8 June, the FCA published a fact sheet intended to provide a 'helpful reminder' of its position on 'insistent clients' (the full title being: Fact sheet 035. Pension reforms and insistent clients). Despite there being no rules or guidance on 'insistent clients', it actually provides a useful re-statement of the FCA's position at a time when Government-led pension reforms make this an issue of increasing significance.

Below is a summary of the fact sheet:

  • The fact sheet notes that the Handbook does not refer to 'insistent clients' and that there is no guidance specifically about them 
  • The FCA notes that there are three key steps on advising an insistent client:
  • The advisor must provide suitable advice via the normal advice process;
  •  It should be clear to the client that the action proposed is taken against that advice; and
  • The advisor should make clear what the risks of the alternative course of action are
  • Where the advice includes a pension transfer there may be additional requirements, such as having advice checked by a pension specialist 
  • The advisor must determine the investor's objectives. The fact sheet specifically notes that wanting to access cash from a pension is not an objective of itself. 
  • Examples of good practice will include the advisor exploring the need for cash, if the investor is looking to access his pension fund
  • Examples of poor practice include looking at the transaction purely in respect of suitability of the transfer with no consideration of the investor's wider financial circumstances
  • The FCA notes the following specific issues around insistent client business from its past experience:
  • Frequently, there is an inadequate assessment of other options;
  • An excessive number of insistent clients seemed to make a decision to transfer based on unsuitable advice;
  • Risks of acting against advice might not be fully explained;
  • Some 'insistent client' transactions were 'papering exercises' and these did not match what had happened in practice;
  • Sometimes a client was advised not to transfer but, as an insistent client, was told to transfer to an unsuitable fund.
  • The FCA is of the opinion that the rationale for insistence should ideally be captured in the client's own words. 

The message to take from this appears to be that the FCA will generally take a dim view of advisors transacting business to allow insistent clients to access their pension funds unless full advice has given and very clear risk warnings have been provided. 

This is very much a live issue at present. The fact sheet makes specific reference to the FCA's review of Enhanced Transfer Value pension transfers (ETVs) which found that 59% were carried out on an 'insistent client' basis. The political objective of pension freedoms is to enable investors to take control over their pension pots.  Doing so may involve more insistent clients.  The FCA clearly sees trouble ahead.