In a message about advising on pension transfers, it set out three key steps for advisers to follow.

The FCA stated: “You must provide advice that is suitable for the individual client and this advice must be clear to the client.

“Advice on pension transfers should follow the normal advice process for pension transfers.

“You should be clear with the client what the risks of the alternative course of action are.

“You should be clear with the client that their actions are against your advice.”

An FCA report last year on enhanced transfer value pension transfers found where a high proportion of cases (59%) were insistent clients, 34% were found to be unsuitable and there were disclosure failings in 74% of cases.

The regulator defined an insistent client as “a client who wishes to take a different course of action from the one you recommend and wants you to facilitate the transaction against your advice.” It added: “Where clients are required to take advice (for example in relation to DB pensions and other safeguarded benefits) then some may decide to disregard that advice.”

The FCA flagged up previous guidance, which stated that
although there are no rules specifically in relation to insistent clients, advisers “must follow the normal advice rules first”.

This entailed obtaining the necessary information about the client and their investment objectives, financial situation and knowledge and experience so as to enable you to make a personal recommendation that is suitable, officials said.

The FCA pointed to its guidelines from last year regarding what to include in the suitability report, in this situation.

It stated: “In the normal way, the suitability report must specify the client’s demands and needs, explain why you have concluded that the recommendation is suitable and explain any possible disadvantages for the client

“Having set out your advice clearly in the suitability report, you need to be clear with the client about the risks of the different course of action and that he/she is acting against your advice. This could be set out in the suitability report or elsewhere.”

The FCA previously emphasised its concerns of cases where:

• there was an inadequate assessment of the other options which would meet the client’s objectives

• excessive numbers of insistent clients resulted from the adviser’s advice not being sufficiently clear

• the risks of the client’s preferred course of action were not clearly explained

• it was a ‘papering exercise’; ie the adviser had processed the case on an insistent client basis but this was clearly not representative of what had happened in practice