IFAs Told To Cover Their Backs With Police-Style Interviews

Lisa Smith, BA (Hons), CeFA

Your financial adviser is fast becoming your adversary if they follow new advice from the Financial Ombudsman.

Instead of looking at the rules that make transferring cash out of a final salary pension a taboo topic, the ombudsman is telling financial advisers to tape discussions with clients and to ask for signed handwritten notes if they are not willing to follow what the adviser says.

The problem for advisers is clients may come back years after switching pensions to claim compensation for bad retirement planning even if the client took the action against the recommendation of the IFA.

The guidance was made official by Caroline Mitchell, of the Financial Ombudsman Service.

“If it is written down and taped that they wish to proceed with a transaction despite the adviser’s advice then when the consumer comes to me 10 years later they will be very much on the back foot.

Get out of jail free card

“There is never a get out of jail free card but a handwritten note should be OK.”

She also told IFAs that she did not expect consumers to grasp the contents of 100-page suitability reports crammed with information to guard against every eventuality.

“I know taping won’t be necessary for everything. I know there is concern it might put up a barrier but think about it from our point of view. That is just the most brilliant evidence,” she said.

“A tape recording is wonderful. A consumer will say nobody told me but if they are told on the recording then that is the end of it.

“I am not telling you what to do but I am saying taped evidence is brilliant.”

Heavy-handed technique

The question IFAs will have to answer is if consumers will want to go through police-style interviews to sort out their pensions and at what stage the recording starts. They may prefer to go to someone with less heavy-handed techniques.

Data protection consideration also apply. From next year, businesses should show their clients have opted in to their contact lists for marketing – and if not, their records must be destroyed as soon as they are not relevant to be kept for business purposes.

A simpler solution would be redefining pension transfer guidance handed down by the Financial Conduct Authority, the watchdog that sets the rules for financial advisers.

The FCA is concerned much of the advice given by IFAs is not suitable for their clients, according to the latest update to come out of the organisation.

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