The FCA has clarified how advisory firms should deal with insistent clients in its latest consultation paper examining new guidance and the implementation of the Financial Advice Market Review (FAMR).
The refreshed rules will make clear that a firm can continue with a client’s request that goes against a recommendation it made, but it should ensure the original advice complied with personal recommendation requirements.
It should also make sure the reasons for the recommendation have been “communicated clearly”.
Old Mutual Wealth’s chief distribution officer Richard Freeman said: “Common sense seems to have prevailed. As long as the original advice meets normal regulatory requirements, and the drawbacks of pursuing an alternative path are made clear, advisers can still support insistent clients.
“It should give firms re-assurance and avoid creating an impasse when clients make an informed decision not to follow the recommendations of their adviser.”
The refreshed rules also state the full risks of going against a recommendation should be made clear to the client and that firms should consider keeping a record of all communications.
The FCA added that best practice would show a clear distinction between the advice being acted against and any subsequent advice.
“This might be achieved through distinct suitability reports,” it added.
As well as improving guidance around insistent clients, the consultation paper also asks for views on three of the 28 recommendations listed in the FAMR, a joint initiative launched by the FCA and Treasury in August 2015.
Following a government order altering the definition of advice the FCA is consulting on the changes that need to be made to its handbook.
The order removes guidance as a regulated activity, meaning information can be shared with a client without an adviser risking it being classed as a personal recommendation.
“The industry as a whole need to be able to offer practical help to customers when they wish to make their own financial decision. If firms are afraid of drifting into advice and resist offering clients any help or guidance at all, the end result is dis-engagement and customer frustration,” Freeman added.
The consultation is open to responses until 2 October.
