Advice or execution-only? The self-directed client
Pieter is financially sophisticated, has researched rates himself, and tells broker Karim: "I don't want advice. I've chosen lender X and product Y. Just submit my application." Karim's firm offers both advised and non-advised (execution-only) service. Karim is uneasy because Pieter's income is irregular (freelance) and the requested €40,000 is high relative to his declared income. Karim submits the application without a suitability assessment, reasoning that Pieter explicitly refused advice. The lender later declines on affordability grounds. Pieter complains that Karim "should have warned him." Karim's file contains only the application form and a one-line note: "Client refused advice."
1. Can Karim lawfully provide an execution-only service here? What must be established and documented?
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Execution-only is possible only within defined limits and with proper safeguards; it is not a blanket escape from conduct obligations.
Karim must establish and document:
- A genuine, informed client request for non-advised service, recorded in a form the client signs or otherwise clearly confirms - not a one-line internal note.
- Clear disclosure of the consequences: that no suitability assessment will be made, that the client bears responsibility for the choice, and what protections are lost.
- The product's eligibility for execution-only: the regime restricts which products and circumstances can be sold without advice; high-risk or complex products, or cases with clear affordability concerns, may not qualify.
- Basic appropriateness/affordability checks that remain mandatory regardless of advice - the lender's creditworthiness assessment is not displaced by the client's refusal, and the intermediary still must not facilitate an application it knows to be unsustainable.
A one-line note "Client refused advice" does not evidence informed refusal. Karim's file would not withstand supervisory scrutiny.
2. Given Pieter's irregular income and the €40,000 request, what should Karim have done, and how should the complaint be handled?
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Karim should have:
- Flagged the affordability concern explicitly: €40,000 against irregular freelance income is a material risk signal. Even in execution-only, he should have warned Pieter in writing that the application may fail the lender's creditworthiness assessment and that he could face difficulty repaying.
- Offered advice as an option, documenting that it was offered and declined, rather than treating the refusal as closing the matter.
- Declined to submit, or submitted with the concern recorded, if he believed the application was manifestly unsustainable; facilitating a knowingly unaffordable application is inconsistent with responsible conduct.
- Completed a proper non-advised record: signed client confirmation, disclosure of consequences, and the warning given.
Handling the complaint:
- Acknowledge that the file does not evidence an informed refusal and that the warning was not given in writing.
- Explain the execution-only boundary honestly: the choice of product was Pieter's, but the absence of a documented warning about affordability is a service failure.
- Offer a proportionate remedy (e.g., re-open the file with advice at no cost, or assist with a revised application) and record the outcome.
- Fix the process: a standard non-advised confirmation form and a mandatory written affordability warning before submission.