Brokers warned over 'insistent clients'

From Insurance Age (October 2015): 


FCA guidance for pensions advisers could have relevance for those selling insurance

Compliance experts have urged the insurance broking industry to take recommendations about dealing with insistent clients on board, after the Financial Conduct Authority (FCA) published a reminder for pension advisers in June.

According to the FCA, pension advisers should document the advice they have given to clients who decide not to take the recommended course of action, so-called insistent clients, in order to show that they have made it clear to the client what they have said and what risks can come from going against their recommendations.

David Sparkes, head of compliance and training at the British Insurance Brokers’ Association (Biba), said that while the regulator has not indicated that it will expect the broking industry to do the same, he thinks it is a simple way for brokers to protect themselves in case of a future dispute.

Documentary evidence

“I want to encourage brokers to document any advice given to clients where the clients are not taking it, be it on property insurance or professional indemnity, so that they at a later point can come back and say ‘this is what I said to you’,” Sparkes stated.

He added: “They should send this documentation to the client along with an explanation of what could happen if the client doesn’t follow their advice.”

Meanwhile, Bruce Fayle, head of financial services at compliance consultancy RWA Group, agreed that brokers would benefit from keeping records of conversations, meetings, and phone calls with clients.

“Unfortunately we live in a society where not many people want to take responsibility for the decisions they make and when something goes wrong they are looking for someone else to blame,” Fayle said.

He further pointed out that if an insurer decided to dispute a claim, there was a risk that the client would blame the broker and say they had been given the wrong advice.

Fayle added: “If there is insufficient information on file about discussions, phone calls and meetings the broker might not be able to defend a professional negligence claim filed against them.”


Grant Scott, operations director at Rugby-based Perry Appleton Risk Services, highlighted that it was an issue of professionalism and of protecting brokers’ own businesses and their clients. According to Scott, whose company operates within both insurance broking and financial services, brokers need to make sure that they have the right processes in place.

“It’s about putting yourself in a defendable position,” he said. “It’s more professional to do it and to be seen doing it. I think there will be more professional indemnity claims if there is no continuity to this process.”

Meanwhile Chris Hannant, director general at the Association of Professional Financial Advisers (Apfa), agreed that documenting advice was a good idea, but added that he wanted greater clarity from the regulator around liability in cases with insistent clients.

He said: “The guidelines are a step forward from where we were before and it is good practice to keep a record, I definitely endorse that. I think it would be good practice for insurance brokers to do this as well.”

Different in pensions

However, he pointed out that the situation was slightly different for pension advisers as they sometimes safeguard their clients’ assets and assist in transactions in a way that insurance brokers do not.

Hannant added that while he welcomed the guidelines, he did not think they had led to any major changes in the pension industry.

“The advisers who were doing this before will continue doing it, but others will still be reluctant,” he said.

Another issue the compliance experts mentioned was that with the new requirements around duty of fair presentation coming into force with the Insurance Act it was even more important for brokers to document what they had done in order to accurately present risks to insurers.

However, Fayle concluded: “The Act will reinforce the importance of documentation, but it doesn’t create it.”



About the author

Bruce has worked in financial services for the whole of his professional life, including 11 years as a Compliance Director of a US owned Independent Financial Advisory and Wealth Management business. At RWA, Bruce led the Audit and Conduct Risk department from our Manchester office. Bruce left RWA in 2023

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