Advisers have welcomed Aifa and Zurich’s move to limit liability for financial advice but some say the proposals are a “fudge” and there should be no compromise on the longstop issue.
Aifa and Zurich published a report last week which aims to tackle the lack of a longstop for financial services as part of their Fair Liability for Advice campaign.
The report puts forward four proposals to introduce a cap on liability for advice.
The first option is to introduce a 15-year longstop through an amendment to the Financial Services Bill, as revealed by Money Marketing last month.
The second option would be the introduction of 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 the advice up to that point.
The fourth option would see advice subject to a 15-year liability limit which 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 longstop. 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 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 on the report’s recommendations, Hall says: “The proposals start well and work towards a fudge. If there is going to be a continued rejection of a longstop, 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 longstop as it just adds complexity.”
Highclere Financial Services partner Alan Lakey says: “It is a fudge. I do not think the lack of a longstop should be compromised on. There can be no element of grey to this.”