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Advisers slam Consumer Panel chair for dismissing long-stop as ‘red herring’

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Advisers have attacked FCA Consumer Panel chair Sue Lewis for branding the long-stop a “red herring” in the debate about how to widen access to advice.

Lewis made the remarks on BBC Radio 4’s Money Box as she spoke about the Government’s Financial Advice Market Review.

The review, formally launched last week, aims to improve access to advice. As part of the review the FCA is consulting on whether to introduce a 15-year limit on claims against advisers.

Asked whether the long-stop could help to address the advice gap, Lewis said: “The long-stop is actually a little bit of a red herring. [The ability to complain] needs to be there because of the long-term nature of some products. There may be other ways of pooling the liability but it needs to be there.”

Highclere Financial Services partner Alan Lakey says the comments are “unhelpful”.

He says: “There must be a recognition that the financial services industry is a different creature to that of 20 years ago.

“The old chestnut about the long-term nature of products falls apart under scrutiny. First, consumers should take responsibility if they fail to understand or review their various plans. Secondly, many other occupations which deal in long-term advice or services have a 15-year long-stop.”

Yellowtail Financial Planning managing director Dennis Hall adds: “Sue Lewis has a vested interest in looking after consumers, but we cannot dismiss this as a red herring.

“The lack of a long-stop is one of a number of issues which impacts on access to advice. It affects succession planning and whether we can get new blood into the profession. Young people will not be willing to have liabilities hanging over them for the rest of their life when that is not the case in any other profession.”

Personal Finance Society chief executive Keith Richards, also speaking on Money Box, said: “Advisers are the only profession which carry unlimited liability for their advice.

“There is no question that the long-stop should be brought back in. The law was changed [from] when lots of 25-year endowments and whole of life policies were sold, so [ending the long-stop] was done for a fair reason but that now needs to change.”

Lewis argued that simplified advice or simplified products were the key to improving access to advice.

She said: “The trick we’re trying to pull here is to simplify and make advice more accessible and cheaper for consumers with relatively small amounts of money.

“You might look at what I think of as the pharmacy model: you can speak to a pharmacist, get some advice and they can sell you a limited range of products.”

The FCA’s long-stop options

The FCA says it is considering the following options as part of its long-stop consultation:

  • Maintain the current regime
  • Introduce a long-stop of 15 years or a different time period “recognising the long life of financial services products”
  • Introduce varied limitation periods linked to the terms of products
  • Strengthen professional indemnity insurance so advisers have sufficient cover to meet long-term claims
  • Set up a compensation fund which all advisers contribute to and which would pay out in the event of a justified claim older than 15 years

The long-stop: The story so far

1980: Limitation Act imposes time limits within which a party must bring a legal claim, including a 15-year long-stop for negligence claims

2000: Financial Services and Markets Act introduced. Regulators say this overrides time limits of Limitation Act

2007: FSA reviews the case for a long-stop

November 2008: FSA announces it will not introduce a long-stop

March 2014: In its 2014/15 business plan the FCA says it will consider the case for a long stop

July 2014: FCA says talks have stalled as the long-stop may be deemed a constraint on human rights under an EU directive

December 2014: FCA confirms the EU directive would not stand in the way of a long-stop

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Oh goodness

    What do you expect. Just look at her. She probably lives in Islington, wears sandals, rides a bike, knits her own jumpers and is a vegetarian. Need one say more?

  2. Surely the lack of a long stop – meaning different treatment for advisers compared to other members of society – is a constraint under the advisers’ human rights.

  3. When appointed in April 2013 the FCA stated

    “Sue has been working as a non-executive director and independent policy consultant. Sue is currently the Consumer Advocate Member on the Chartered Insurance Institute’s Professional Standards Board, and is a Trustee of the Personal Finance Education Group and of Stepchange, a debt advice charity. As a consultant, Sue has advised Which? on consumers and financial services, and worked with the Organisation for Economic Cooperation and Development (OECD) on financial education. Previously Sue held a variety of senior policy roles in the Civil Service across a range of departments including HM Treasury, the Department for Education and the Cabinet Office.”

    John Griffith-Jones, chairman designate of the FCA said:

    “I am pleased to have been able to make such a strong appointment as Consumer Panel Chair. Sue Lewis has a passionate interest in consumer issues coupled with vast experience in financial services policy. I look forward to working closely with her and the Panel.

    Her Linked In profile states

    Member, Financial Services User Group
    European Commission
    December 2013 – Present (1 year 11 months)

    Chair
    Financial Services Consumer Panel
    July 2013 – Present (2 years 4 months)London, United Kingdom
    I lead the Consumer Panel, an independent statutory body which advises and challenges the Financial Conduct Authority on behalf of financial services consumers.

    Trustee
    StepChange Debt Charity
    July 2012 – Present (3 years 4 months)
    Consumer Advocate Member, Professional Standards Board
    Chartered Insurance Institute
    2012 – Present (3 years)

    Owner
    stl consultants
    2011 – Present (4 years)west London
    UK and international consultancy specialising in policy and strategic advice on financial education, financial inclusion, financial services regulation, consumers and financial services.

    Trustee
    Personal Finance Education Group
    2010 – Present (5 years)London, United Kingdom

    Head of Savings and Investments
    HM Treasury
    2005 – 2011 (6 years)

    Deputy Director
    Department for Education
    2001 – 2005 (4 years)London, United Kingdom

    Deputy Director
    Cabinet Office
    2000 – 2001 (1 year)

    Head of Cruickshank Banking Review
    HM Treasury
    1999 – 2000 (1 year)London, United Kingdom

    Head of Training and Development
    HM Treasury
    1997 – 1998 (1 year)

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