Organismos Autónomos

Eighteen submitters suggested that it should be up to the client and the AFA, provided the client has been fully informed in writing of the AFA’s view as to suitability.

Two submitters suggested that a client’s right to make their own decision should prevail, but that an adviser would be prudent to keep an adequate record of the client’s informed decision.

One submitter suggested that an AFA should be required to document the unsuitability in understandable writing to the client, and the client must sign it.

Another submitter suggested that an AFA should be able to provide the service if the client insists, but that the client’s express consent should be required.

One submitter suggested that the AFA could proceed if the client signed a waiver, but that it would be unwise to do so.

Proposed standard 13: AFAs must inform client and not provide services if the financial adviser services offered by the AFA are unsuitable

Where the outcome of the suitability analysis shows that the financial adviser services offered by an AFA are unsuitable for the client’s needs, the AFA must make this clear to the client and not provide the financial adviser services.

One submitter stated that AFAs should be able to provide financial adviser services if the AFA has informed the client that the services are not suitable and the client has expressly provided in writing that they wish the service to be provided.

One submitter stated that if an AFA feels strongly that they will not be able to provide suitable services then they should declare the unsuitability. It was suggested that in this case it would be best to ask the client to go to another provider. It was also stated that if, however, the client signs a document acknowledging that the AFA has told them the service is unsuitable, then the AFA should be permitted to accept this and provide the service.

One submitter stated that if the client wishes to buy a product or service that the AFA believes is unsuitable, the AFA should provide written advice with a clear explanation of why it is unsuitable. The client should be permitted to proceed if the client signs a waiver.

One submitter stated that the client should decide (provided they are in a sound mental state) and the AFA should get a signed disclaimer.

One submitter stated that the AFA should be able to provide the services if the AFA informs the client that the services are not suitable and the client expressly confirms in writing their wish that the AFA provide the service.

One submitter suggested that when a client wished to follow an unsuitable path, s/he should be allowed to do so if s/he indemnifies the adviser in writing.

One submitter stated that the AFA should be able to provide the services if the AFA informs the client that the services are not suitable but the client still wishes the AFA to provide the services. The agreement to proceed under these conditions must be recorded for the protection of the AFA. That submitter also stated that AFAs are required to carry out a suitability analysis and provide advice that is suitable for the client. However rather than proposed standard 12 “AFAs must restrict financial advice where the client has not provided full information for suitability analysis”, it was suggested that the AFA should be required to ensure that, if restricted financial advice is given or financial planning service provided, the statement of advice (as required by proposed standard 15) includes a written warning to the client that the advice or services are restricted and state the nature of the restriction and reasons for it.

One submitter suggested that an AFA should not be prevented from assisting a client with implementation after a client has chosen to reject part or all of the advice.

One submitter suggested that AFAs should be left to decide these matters themselves (e.g. by a client file note covering the risk warnings provided).

One submitter suggested that the interests of the client are paramount, and subject to the adviser’s right to refuse to do something illegal, for example, they should effect instructions that are contrary to their advice after properly informing the client. That submitter suggested that the client’s instructions should be recorded, at least in a file note if instructions were given by telephone.

One submitter stressed that the client’s wishes had to take precedence, and if they wished to act contrary to a suitability analysis they should be allowed to do so.

One submitter responded in the negative and suggested that this was an attempt to impose particular management processes on advisers.

Nine submitters believed that this is the client’s decision and that the Code should not assume that all investors require a full financial planning service.

One submitter suggested that the client’s wishes should always be respected, and it should be the AFA, not the Code Committee, that determines whether to continue to offer the service. The submitter noted that clients value the ability to retain control. That submitter suggested that it will be good practice for AFAs to clearly outline their concerns to clients and document that they have done so (though the submitter was ambivalent about whether this should be a requirement).

Six submitters stated that if a client wants to proceed it should be at the discretion of the AFA whether to offer the services. They submitted that it would be prudent for the AFA to outline his or her concerns to the client and to document this. But the six submitters were ambivalent about whether advice and a warning should be required under the Code.

One submitter suggested that, from an investor’s perspective, the decision should be left to the customer. They stated that the adviser is retained to provide advice, but the investor must make the decision.

One submitter suggested that, with the client’s money at risk, it should be the client who decides whether to proceed with a particular course of action.

One submitter suggested that the adviser must be able to provide the service regardless.

One submitter stated that the suitability analysis is a flawed concept and should not be included in the Code. However it was submitted that AFAs should be permitted to make a transaction or provide a product that is unsuitable. It was submitted that the Code should not limit the consumer’s right to buy something they do not need or to make a poor decision. It was also submitted that the professional should be required to give a warning of the lack of suitability but the consumer, once informed of this, should be allowed to continue with the unsuitable path.

One submitter stated that this is a decision between the client and the AFA, if the client agrees then their choice should be respected. They suggested that the adviser should make a clear file note or obtain the client’s sign-off that they are aware that the services they are choosing are not the most appropriate for them based on the suitability analysis.

One submitter stated that the standards pertaining to suitability analyses should only apply to financial planning services and that if a consumer wants to make an investment transaction, they should be permitted to do so. It was suggested that prohibiting consumers from doing so (by not allowing AFAs to act for them) unjustifiably infringes on consumers’ personal freedoms. Similarly, consumers may seek simple, quick advice on products they are already intent on purchasing (eg “what are the advantages of your company’s third party car insurance?”). If the Code requires such advice to be preceded by a suitability analysis, the effect will be that such clients do not receive advice at all.

One submitter stated that an adviser should be free to provide services if a client still wishes to undertake that transaction despite an adviser’s advice to the contrary. They also submitted that it should be made clear that an adviser is not obliged to provide the service, and should retain some prerogative to decline to act for the client.

That submitter also said that it is difficult to require an adviser to override the wishes of a client, particularly in a situation where the client is otherwise fully informed and wishes to proceed. They submitted that absent illegality, or improper motive on a client’s behalf (insider trading, market manipulation) client instructions should always be afforded the highest priority. But it was noted that if a client is mentally incapacitated or under duress or undue influence the adviser should be prevented from acting on instructions.

One submitter stated that the AFA should be free to provide the services if the client wants the service.

One submitter preferred more flexibility so that the AFA is able to provide the services if the AFA informs the client that the services are not suitable but the client still wishes to proceed.

One submitter stated that it should be the client’s decision.

One submitter stated that this is a matter for the adviser to raise with the client at the time of giving advice and then the decision is left to the client.

One submitter stated that if the client wishes to proceed after appropriate advice from the AFA, then it should be a matter for the client to decide.

One submitter suggested that it should be up to the client and adviser whether to continue in these circumstances. That submitter was “ambivalent” about whether full disclosure should be mandatory.

One submitter stated that they disagree with AFAs not providing services even if the AFA believes the services are not suitable for the client. They submitted that advice is just an opinion and it should not be binding on the customer or limit their choices if they disagree with the advice. Clients should have the freedom to act on the services provided by the AFA however they wish. They agreed that in these circumstances the client should give informed consent in writing. The submitter stated that this is similar to other professions ie clients can instruct their lawyer to act in a way that is contrary to the advice given.

One submitter stated that standard 13 is unnecessary and/or is addressed under standard 1. They also stated that standard 13 conflicts with standard 11. They also observed that it would be prudent for an AFA providing financial and product advice in this circumstance to communicate in a transparent fashion the situation and options available.