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Financial advisory
RES5Financial Advisory Services✓An adviser proposes that a client surrender an existing endowment policy — incurring a surrender penalty — to buy a new plan that offers the same level of benefit but at a higher total cost. Under FAA-N16 and the switching guidelines, the adviser should:
Para 42 of FAA-N16 prohibits recommending a switch that is detrimental to the client. The Authority looks at factors such as whether the client suffers a penalty on terminating the original product and whether the replacement gives the same benefit at a higher cost — both present here, making the switch detrimental.
A signed acknowledgement, a bigger insurer, or a free-look period does not cure a switch that is detrimental on the cost/benefit test.
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