View more on these topics

Advisers back FCA chief’s PI comments


Advisers have welcomed comments made by FCA chief executive Andrew Bailey that the professional indemnity insurance market is not working.

Speaking at the Association of British Insurers’ annual conference this week, Bailey said while advice firm failures were smaller than those of banks, PI insurers were frequently writing contracts that excluded the losses, leaving the Financial Services Compensation Scheme and capital adequacy failures to pick up the bill.

Bailey said: “The front stop should be commercial insurance in the form of PI cover, much as it is for lawyers and other professions. But PI cover is not by experience always reliably performing the role, particularly in the IFA and investments world – the contracts are framed often in ways that rule out loss absorption in the context we are dealing with here when the firm fails. What is the consequence of this? It is that the protection of client assets and ultimately the FSCS become the primary lines of defence, and this is what has happened.”

Highclere Financial Services partner Alan Lakey called Bailey’s comments a “very sensible observation”.

He added: “I hope this is indicative of Mr Bailey’s tenure.”

Page Russell director Tim Page said it is now clear the FCA understands there are “structural failings with the way PI contracts are constructed,” but cautioned premiums may still rise in the future whilst reform is pushed through.

He adds: “The reason I am relatively pessimistic about this is because the long-term solution to this is that we sort out PI contracts which will mean that IFAs end up paying higher premiums for proper cover.”

“The problem is that the high premiums will start while we are still paying the high levies to the FSCS and it will take a few years before the levies to the FSCS come down and so there would be a period where we will be paying double premiums and that will painful for the sector. It is a case of be careful what you wish for because they are aware that PI needs fixing but we need to be aware that to fix it will be painful.”



Opinion poll

The report (Money Marketing, October 25) that Marlborough Stirling&#39s research has found that 53 per cent of people prefer not to meet their financial adviser in person flies in the face of general perceptions. It also contradicts other (perhaps more disinterested) research studies as well. Typically, you would expect to find that some 70 per […]


The new software taking on the automated advice market

This year has seen an increase in collaboration between regulators across the world. Those in Australia, Singapore and the UK have each established co-operation deals, in particular around their respective approach to financial technology. Such arrangements should create greater consistency of regulation, which, in turn, is likely to lead to the rise of global financial […]

Responsibility Matters

The latest update from the Sustainable Investments Team at Royal London Asset Management, Responsibility Matters, is now available. In this edition the team look at issues such as the growing acceptance of sustainable investing and technology in China. Read the update here: The value of investments and the income from them is not guaranteed and […]

How to balance bottom-up with top-down research in constructing multi-asset credit portfolios

In this short video, Azhar Hussain, head of global high yield at Royal London Asset Management, explains how his team balance bottom-up with top-down research in constructing multi-asset credit portfolios. Watch the video in full The value of investments and the income from them is not guaranteed and may go down as well as up […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm