View more on these topics

Claim is the spur

The pension review was an expensive business all round. The lessons learned are that risk management and claims&#39 prevention are key elements of the new breed of financial planning practice. The tenets of this new regime are that:

All clients must be treated as if they know nothing about investment business.

All clients are potential claimants against you.

You have no control over politically led or regulatorled reviews.

It is a sad fact that clients stand by you until they are practically invited to claim against you. The pension review showed that good clients, including friends and even relatives, see the professional indemnity insurers as some sort of compensation fund.

With excesses on the increase and many types of business practically uninsurable, you need to be aware of your risk management.

Risk warnings

Make sure your warnings are current and relevant. You are not in a winning position with warnings. Make them too simple and it will be argued that they do not cover you but make them too complicated and it will be argued that the client did not understand them.

Your fact-find information needs to be as current as possible. It is sometimes alleged that if the file misses some information from the audit trail, it must be negligent. This is simply incorrect. The negligence is the advice. When the advice occurs, you must make sure you get the client to sign a disclaimer (see above).

I cannot guarantee this letter would protect you in all circumstances but it does demonstrate that the client took your advice with their eyes open. It seems wholly unfair to punish someone 10 years later when thinking has advanced, based on standards which did not exist at the time of the advice.

With such a letter for each piece of advice, you cannot do yourself any harm.

Compliance/training and competence protection

All network members pay for their network to provide them with the core regulatory services. The network is under a duty to ensure that these services are provided competently and that they offer protection and guidance.

When the wheels come off, the standard general indemnity clauses are used to pass the loss and damage back on to the member firms. This seems to be logically incorrect as, in many cases, the failing in the provision of compliance or T&C leads to the client suffering loss. The other argument is that if you are paying to be guided and, by virtue of this, protected, you should not have losses passed back to you at the first opportunity.

It would seem good risk management practice to record each and very compliance/T&C review with a letter and file note (see left).

The need for risk management is acute as we move into the new era. Clients should not be afraid to confirm that they have read your advice. Networks should not be afraid to confirm that they are adequately delivering their services to protect you.

To do nothing is leaving things to the hand of fate. Pension review, FSAVC review, endowment review, Cat-standard review?

If you have any questions for Money Marketing&#39s legal surgery,please email them to

Please note that neither Money Marketing nor our legal correspondent can accept any liability for answers given to queries


This is the chance for life offices to fight 1% regime

Returning to the UK at the end of March after a holiday,I notice that there has been much comment and discussion concerning Norwich Union and its decision to reduce commission on certain products.NU has often been arrogant in this respect, paying less commission on selected products than competitors.However, in this case, rather than bemoan the […]

Asia the place to invest says Govett

Asian markets are providing improved opportunities for investment says fund manager Govett.It points to evidence that recovery in the region has been supported by positive external macro influences as well as internal growth and says it could be the next region to deliver long-term returns.Govett Asian chief investment officer and manager of its Asia Pacific […]

Bristol & West – Online 6 Month Bond

Friday, 12 April 2002 Type: High interest account Minimum-maximum investment: £1,000-£1m Interest rates: 4.2% a year gross, 4.12% a month gross Term: Six months Offer period: Until May 6, 2002 Withdrawal penalties: Withdrawals not permitted during term Tel: 0845 1110117

New version of Britannic low-start loan

Britannic Money is launching a new version of its low start flexible mortgage with a current account option from day one, an initial rate of 3.89 per cent, no arrangement fee, £200 cashback and free MPPI cover for the first six months of the mortgage. Britannic hopes it will appeal to customers who have traditionally […]


Employer iPMI responsibilities could continue to escalate, says Jelf

New laws in Dubai will put the burden of providing international private medical insurance (iPMI) firmly on the shoulders of the employer in order to maintain the country’s leading healthcare facilities. With 10,000 UK nationals having moved to the country since 2007 and only 16.5 per cent of the total 8.2 million people living there being Emiratis, Jelf Employee Benefits believes this move was inevitable and employer responsibilities could continue to escalate in future.


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