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How we’re dealing with insistent clients

Insistent clients have become a hot talking point in the wake of the new pension reforms, but how should advisers deal with the issue? Nick Bamford, executive director of Informed Choice, talks to Adviser Business Review about how he is dealing with clients and warns of potential claims further down the line

Adviser Business Review: What approach have you taken with insistent clients?

Nick Bamford: The new rules are unchartered territory for pension savers and will prompt many to see what they can get, but we have a duty as an adviser to do what we can to protect clients’ money and act in their best interests. If a client approaches us wishing to cash in their entire pension pot and we strongly believe it would be the wrong thing for them, we would very politely decline to do it. I am particularly against movement from defined benefits to defined contribution; whenever a client wants to give up defined benefits I dig my professional heels in and say no.

Carrying out a transaction that we would not advise could cause all manner of problems with PI and the Ombudsman in the future. Who will clients turn to if they run into financial difficulty further down the line? Advisers who act on their clients’ request, against their better professional opinion, could potentially be liable for future claims.

ABR: Are insistent clients likely to be an issue for advisers from now on?

NB: Yes I believe so. We have been approached by a number of people interested in cashing in their pension and I fully expect we will see more looking to do the same. The rules are breaking new ground and clients will look to test the boundaries, without fully understanding the implications of their choices. The trouble is, they are at risk of making a decision they could live to regret. As an industry, we have to be very careful in our discussions with clients and manage their expectations. In some cases, taking out a large chunk of money or their entire pension pot may be the right thing to do, but in many cases it won’t be.

Of course, there will be some individuals who will wait until they find an adviser willing to carry out their request, but on the whole we have found clients to be very receptive to our advice. They pay for a professional opinion and trust us to have carried out thorough research and provide them with the best possible financial advice.

ABR: In what circumstances would you agree to carry out the transaction?

NB: There are certain cases where it makes sense for the individual to withdraw a large chunk of money. If clients need the money and cannot access it from other sources, then we would consider it, especially if they can take advantage of the tax breaks available over several years. One of my clients recently asked for a large sum of his pension pot to help his daughter buy a property and in this case, we decided it was the best course of action for him.

It’s all about purpose; clients need to ask themselves, does it really make sense? Just because you can cash your pension doesn’t mean you should. There is a choice here and we need to be sure that withdrawing the cash is the right move for our clients. If we deem it unsuitable, we would refuse to do it.

ABR: Do you feel HMRC and the regulator should offer more guidance to advisers?

NB: No, I don’t think the industry would benefit from more rules or interference. I’m very cynical; in my view, this is all about taxation and raising more money. It is up to us as an industry to find our way and manage client expectations. Nothing has really changed, other than there’s an additional option on the table. The technical aspect of it isn’t significantly different; what has changed is our communications with clients and ensuring they fully understand what the new option entails.

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