Existing Clients - Ad hoc Withdrawals

SA96SA96 Member
edited August 7 in General

We're currently reviewing our internal processes and I wanted to gain some feedback on what other firms do.

For existing clients who want to make a withdrawal from their ISA/GIA - Do you provide advice in the form of a letter/report? Or do you allow these clients to make a withdrawal at their own request.

My interpretation is that if a client is paying for ongoing advice, they should be receiving advice on all withdrawals. But there are other people in my firm who think differently and their argument is that if a client doesn't ask for advice, we're not obliged to provide it.

The main issue we have is that providing a letter/report often delays the client's withdrawal, as it creates additional work for the adviser/paraplanner.

What does everyone think?

Comments

  • Advised. i) Tax implications ii) Adviser may think the withdrawal best comes from elsewhere iii) Reviewing cash flow to see how it impacts objectives.

  • Not sure, but would having an execution only process in place be appropriate?

    That way, you give the client the choice:

    1) Do you let us advise you on the best place for a withdrawal, which may take a bit more time, but may benefit you in the long run (for the issues outlined by Sean above). This may be covered in the ongoing service, or may be a fee depending on fee structures of the adviser/firm.
    2) Do you choose to take a withdrawal from where you select, but be aware that we won't be providing any advice on such a decision, and there may be tax and long term implications for this course of action. You would then either transact on the clients behalf, or inform them to go directly to the provider (which may not be possible depending on the provider)

    Do others agree with this?

  • Hi

    At a high level, you should be aware of any expected withdrawals in a review cycle (and arguably already have identified where that cash will come from ahead of the date it's needed), and there should be an emergency fund in place for anything unexpected.

    Therefore, if an unexpected withdrawal from assets is needed then in my opinion it should be advised. From a compliance angle, I would then be checking the file to establish whether this is a client or adviser shortcoming in the information gathering part of an annual review (i.e. did the adviser ask or not).

    Regardless of whether you do XO or advised, you need to write a letter, so there is a time cost to the firm and it won't take that much less. It could be said that an XO letter can be achieved faster through an admin process (rather than paraplanning), but I wouldn't argue this point. Personally, like you say, I don't agree with an XO process for a serviced client. Too easy to blur. Therefore it would need a paraplanning function with adviser sign-off.

    The letter doesn't have to be more than a page or two, so it needn't be onerous.

    In terms of fees, it's perfectly acceptable and fair to have ad-hoc charges for 'out of the ordinary' transactions. You could set this out within the ToB e.g.

    We may charge you for work that doesn't form part of our standard ongoing services. For example, you come to us during a review cycle with an unexpected need for a capital withdrawal. If you give us at least 3 weeks' notice of the need for capital, we won't charge you. However, if you need it sooner, we will make a one-off administrative charge of £X to expedite your request. If the source of funds will be a pension or bond, then due to the added complexities of these investments, we will always make a charge of at least x hour of advice and x hours of technical support, which is £x based on the current hourly rate in this agreement.

    Benjamin Fabi 
  • SA96SA96 Member

    Thank you everyone for your comments.

    It has been a massive help!

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