FCA Offers support for advisors over Final Salary Pension Transfer demands from Insistent Clients



Posted on: 16th August 2017

The Financial Conduct Authority (FCA) has offered help to financial advisers in dealing with clients who are insistent on carrying out a Final Salary Pension Transfer, even if it’s not in their best interest.

Insistent Clients

Not everyone is willing to follow every bit of advice they are given. All financial advisors, at some point. deal with what is often called, insistent clients, those who decide, for their own reasons, to act against an advisor’s recommendations.

At the beginning of this month, the FCA published a consultation paper that outlines how dealing with such clients will now be part of the regulator’s handbook for regulated businesses. The changes are not new, but formalise the guidelines that were previously set out in an information sheet published by the FCA last year.

The result of the new publication is that advisors now have far greater regulatory certainty when it comes to advising clients who are insistent on a defined benefit pension transfer.

FCA Provides More Support

The FCA consultation paper, published on 1st August 2017, states that the FCA has proposed this change due to the steep rise in demands for defined benefit transfers since the introduction of pension freedoms two years ago. The FCA goes on to say:

“Firms have told us that they need more support in this area, particularly in light of the legislative requirement that consumers must receive regulated advice for any DB [defined benefit pension] where the value of the fund transferred exceeds £30,000.”

The regulator goes on to say that if a client does go against the personal recommendation of a financial adviser, they must “have the consequences fully explained so they understand the implications of proceeding against the recommendation”.

Final Salary Pension Transfers – Advisors Guidelines

The FCA is clear in the new guidance that financial advisory firms must clarify all recommendations with the client and make sure the risks are clearly understood.

Firms must:

  • Have original advice “which complies with the requirements for giving a personal recommendation”
  • Make sure the recommendations are clearly communicated
  • Make sure the risks of the alternative action are clearly communicated
  • Make sure there is distinction between any subsequent advice and the advice which was acted against
  • Keep a record of the communication with the client that makes it clear the action is against the personal recommendation.

The regulator also made clear that it is proposing that its handbook rules for insistent clients apply “wherever a personal recommendation is given, not just for the transfer and conversion of safeguarded benefits”.

Consequences of new guidelines

For those advisors, like Have, who already adopt best practice policy with their clients, these new guidelines will not change the client-advisor relationship. They will, however, provide a more stable framework for advisors  and give them greater regulatory certainty when dealing with insistent clients.

The one situation that is not changing, is that final salary pension transfers are continuing to rise considerably. Meaning that, with FCA support guidelines in place, it is a better time than ever to take advice on transferring a DB pension.

For more information on transferring your Final Salary Pension, talk to one of Haven experts.