The regulator has published a report of nearly 70 pages covering the subject of guidance regarding insistent clients.
This is a consultation paper entitled Financial Advice Market Review (FAMR): implementation Part II and insistent clients.
The FCA has laid out its expectations in the paper, warning advisers that it is “essential that clients in this position have had the consequences fully explained so they understand the implications of proceeding against the recommendation”.
Officials told advisers in the report that there must be “a clear distinction between the advice that is being acted against and any subsequent or concurrent advice” and they suggested that “this might be achieved through distinct suitability reports”.
The report stated that when proceeding with a request for an insistent client it is important that the firm that has given the personal recommendation makes it clear:
1) what element of its advice is being acted against
2) that any further advice given is subsequent to the specific action requested by the insistent client.
The FCA said its final guidance will make it clear to advisers that where they facilitate a request that conflicts with the personal recommendation they should ensure:
• The original advice given complies with the requirements for giving a personal recommendation.
• They have communicated clearly what their recommendation is and the reasons for their recommendation.
• They have clearly communicated the risks of the alternative course of action proposed by the client and why they have not recommended it.
• They keep a record of the process followed and the communication 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, the FCA said.
The FCA wants to hear responses to this Consultation Paper by 2 October 2017.
Send them using the form on the FCA website or by post:
Advice and Distribution Team Financial Conduct Authority 25 The North Colonnade Canary Wharf London E14 5H