Covering Brexit in Suitability Reports
Rcaisley
Member
Good afternoon all,
We have had a client come in absolutely adamant that he wants to withdraw his full PCLS allowance and invest the capital in Premium Bonds to protect the entitlement against Brexit. He tells us that he is very concerned about the 'No deal' Brexit scenario and this is his sole reasoning behind claiming his full PCLS.
The adviser has advised against doing this if the capital is not needed. He's currently invested in Multi-Asset Passive funds with a Cautious ATR. I also believe that this is not the right thing to do as the multi-asset fund offers diversity and the effects of Brexit are likely to have a small overall impact on his pension funds over the longterm. He's over 5 years away from his intended retirement age so has time on his side as well.
What are others writing in their SR's for reasons against making such actions?
Comments
The problem you are going to have when writing a Suitability report is that your advice will be not to do take the PCLS for the reasons you state above and that it is bringing the money into his estate from an IHT friendly environment,. I think you are in the realms of insistent client here.
Yeah, I think it is going to be an insistent client for the adviser on this case. He is an existing client. Just trying to add more content to the SR as to why we are advising not to take the whole PCLS if it's not required and can be avoided. Figured that this "Brexit panic" must be common.
If you market yourselves as planners and the investment part is simply the engine behind the plan, then I would replay some worst case scenarios through cash flow software and demonstrate that he has the capacity to withstand any losses.
If the client still wants to do it, I would go down the insistent client route detailing all the reasons why you are advising not to do it, get the client to write a letter explaining why he wants to do it and then do it.
I wouldn’t get into a market conversation outside of no-one knows what is going to happen.
These points may have already been discussed with him but i think it boils down to sticking to whatever plan has been put in place for him and ignore outside noise. He is effectively trying to time the market and there is no guarantee the markets will dive whatever the Brexit result is. He is likely to miss out on any recovery too (there are charts around demonstrating the impact of missing out on rebounds).
What is he going to do with the PCLS once he has withdrawn it? Presumably hold it in cash. How does that impact on his ability to meet his goals vs leaving it invested? I've already mentioned the fact that the funds will sit in his estate and potentially liable to IHT.
Not sure i've answered your question there but just some thoughts off the top of my head!
do you have to write an unsuitability report for taking PCLS? (Seriously)
I would suggest writing the suitability report for the advice you have given him, and then (as @Nathan says) get a written letter from him (not typed by you; it must be his words) explaining why he wants to do it.
Whether you facilitate this is obviously up to you and your processes for dealing with insistent clients.