In a case reported by FSCL, following a complaint by his client, an adviser stumped up 50% of a client’s income protection premiums paid from 2011 to 2024, which FSCL thought was fair.
According to FSCL, in 2024 the client “…made a complaint against her financial adviser, saying that he did not cancel her income protection policy even though he knew that she had become a stay-at-home parent and had been unemployed since 2011.”
The client told FSCL that “…she did not realise that income protection was still part of her policies package and would have expected the adviser to let her know she was paying for insurance she could not actually claim against.” No mention is made of the annual renewal notices the client is likely to have received from her insurer! Most likely these would have recorded that income protection was included in her policy.
The adviser told FSCL he believed that the client “…always planned to go back to work once her children were in school, so she did not want to cancel the policy.”
Unfortunately, the adviser had no record or file notes confirming the client wanted to keep her income protection. According to FSCL this created a “he said she said” situation, a situation where FSCL say they will likely give more weight to the client’s memory than the advisers’ (because advisers deal with many clients).
So, clearly much better record keeping was needed, but for me there are some other issues this case raises.
- Advisers must act proactively: This case suggests to me that advisers have a duty to proactively advise their existing clients, especially when it comes to matters and product information a client is unlikely to have knowledge about. Advisers are not expected to passively wait for a client’s instruction. It’s no defence to claim the client didn’t ask!
FSCL appear to have no criticism of the client’s reported expectation that the adviser take positive action to let her know she was paying for insurance that “… she could not actually claim against”. (Note: decent income protection policies will pay benefits to unemployed people, albeit for a different definition of disability and possibly at reduced monthly amounts.)
- The importance of carefully planned reviews: This client held income protection she said she didn’t need or want for about 13 years! Were there no reviews during this time? Presumably, if there were, there were no records kept.
I believe advisers would be wise to treat client reviews with some formality around actually ‘reviewing’. Simply asking the client if anything has changed since the last review is unlikely to be sufficient. If this adviser had done a proper review the question of continued income protection would have come up for decision by the client.
- The opportunity for complaints is everywhere: I see a great many opportunities for clients to feel aggrieved and make complaints against their adviser or FAP, even after receiving what many advisers would probably view as ‘acceptable’ advice.
From my work with advisers, I believe many such potential complaints are enabled usually by what advisers are not doing.
Advisers are operating under a new framework of expectation. This requires a new way of giving and recording advice, to ensure the ability to mount a strong, credible defence against complaints.
