You will be able to handle a client who insists on a different product or amount without abandoning your duties.
Ravi has read about a technology fund that rose sharply last year. Wei Ling's recommendation, based on his fact-find and risk profile, was a diversified fund with a regular monthly amount. Ravi listens politely and then says, "I hear you, but I want to put S$8,000 into the tech fund in one go. It's my money." He is right that it is his money. The question is what you do next, and what your file says afterwards.
Start by making sure the client has heard your reasoning as well as your conclusion. Clients sometimes push back because they think your recommendation is generic or cautious by habit. Explain why it differs from what they want in terms of their own situation.
Wei Ling says: "My concern is that S$8,000 is about two-thirds of your savings, and a single-sector fund can fall a long way in a bad year. You told me your parents depend on you and your emergency fund isn't complete yet. If this fell by a third just when you needed the money, you'd be selling at a loss. That's why I suggested spreading it across more of the market and putting it in over time."
Be specific about the risks of their choice: concentration in one sector, the chance of large falls, the time it may take to recover, and what that would mean for their other goals. Use example amounts from their own figures, clearly labelled as examples. Do not overstate them either, because the aim is an informed decision and frightening someone into agreeing is a different thing altogether.
Then ask whether they still want to go ahead. Many clients change their mind once the risk is in their own numbers. Some do not, and that is their right.
If the client goes ahead against your advice, the record has to show three things clearly: what you recommended and why, what the client chose and their reasons, and the warning you gave.
Use the client's words for their reasons and your words for your warning. Wei Ling's file note reads, in part: "Recommended diversified fund, regular monthly investment, based on risk profile and fact-find (emergency fund incomplete, parents dependent on client's income). Client chose to invest S$8,000 lump sum in single-sector technology fund instead. Client's reasons in his words: 'I've followed this sector for years and I'm willing to take the risk for a higher return. I won't need this money for at least ten years.' Explained that the fund is concentrated in one sector, can fall sharply, and that the amount is around two-thirds of his savings while his emergency fund is not yet complete. Client confirmed he understood and wished to proceed."
Write it on the day, while both of you remember the conversation. Some firms ask the client to sign a separate acknowledgement. If yours does, the note still matters, because a signed form shows the client agreed to something but not what was said.
Most firms have a specific process for purchases the client makes against advice, or outside the recommendation. It may involve a separate form, a declaration from the client, or a supervisor's sign-off before the case is submitted. These cases are higher risk for everyone, so firms often look at them more closely. Follow the process every time, even when the client is impatient.
Check whether your firm allows the transaction at all in the circumstances. Some firms limit what they will process outside a recommendation, or have extra steps for certain products or client groups. If you are not sure, ask compliance before the client signs.
There is one temptation here that must be resisted completely. When a client chooses something you did not recommend, the case can look awkward on file: a risk profile that says moderate, and a purchase that says aggressive. It can be tempting to go back and change the fact-find or the risk profile so that the client's choice looks like your recommendation.
Never do it. Changing a record after the event to make it fit the outcome is falsifying it. It hides the real decision, it removes the evidence that you gave the warning, and if it is discovered, it turns a defensible client choice into a serious problem for you and your firm. Lesson 5.4, Audit three of your own files, comes back to this: you can add a missing note with today's date, but you never backfill facts.
The honest file is also the safer one. A file that shows a clear recommendation, a clear warning and a client who chose differently is exactly what a reviewer hopes to see when a client goes against advice. The one that has been rewritten is the one that fails.
The file note for a client-directed purchase is short, but every part of it matters. It should let someone who was not there understand what you advised, what the client decided, why, and what you warned them about. In the activity below you write that note for a client who chose a higher-risk product than you recommended.
Write the file note you would make for a client who chose a higher-risk product than you recommended.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).