Advisers have welcomed Aifa and Zurich’s move to limit liability for financial advice but some say the proposals are a “fudge” and the long-stop issue should not be compromised on.
Aifa and Zurich published a report earlier today to look to address the lack of a long-stop for financial services. The report is part of an ongoing Fair Liability for Advice campaign.
Four proposals have been put forward to introduce a cap on liability for advice.
The first option is to introduce a 15-year long stop through an amendment to the Financial Services Bill, as revealed by Money Marketing revealed last month.
The second option would be different liability limits depending on the nature of the investment.
The third option, “customer-agreed liability”, would effectively “stop the clock” on advice given after a certain point, such as at the end of the accumulation phase, where the customer agrees they are satisfied with advice up to that point.
The fourth option would see advice subject to a 15-year liability limit, but this limit would be extended from the last financial review, a kind of “rolling liability cap”.
Jacksons Wealth Management managing director Pete Matthew says: “I like the idea of a reviewable long-stop. Any adviser who is doing their job will be reviewing past advice, because even though advice may have been right at the time the world changes and that advice may no longer be suitable.
“Anything is better than nothing, and it would be an achievement just to get a flat 15-year long-stop. But I would love to see something more flexible and mutually agreed with the client than that.”
Yellowtail Financial Planning managing director Dennis Hall says it is right that the long-stop cause is being championed.
He says: “It is a question of fairness. It is not right that we are only profession or trade that does not have some form of statutory protection. The effect of the lack of a long-stop is disproportionate, as those who run their own businesses can carry a huge liabilities potentially to our grave, but those who work for larger firms do not have that as the firm will pick up the tab.”
But Hall is not convinced about some of Aifa and Zurich’s recommendations.
He says: “The proposals start off as good and work towards a fudge. If there is going to be a continued rejection of a long-stop then it is probably good to come away with something, and these proposals will stimulate debate. But I am not sure you want to end up with anything other than a straight long-stop as it just adds complexity.”
Highclere Financial Services partner Alan Lakey says: “It is a fudge. I do not think the lack of a long-stop should be compromised on. As soon as you set out on the road to compromise you do not get what you want. There can be no element of grey to this.”