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Don&#39t make small guys the fall guys

None of us can dodge the professional indemnity issue. We have all seen or will see a huge increase in premiums.

That said, I do feel that DBS has handled the problem badly and is unduly penalising the smaller IFA. It has increased its monthly fee for a sole trader from £200 to £330.70 and this will apply whether the IFA has a turnover of £40,000 or £100,000 a year. I feel that this is most unfair.

Who ever heard of the small guys subsidising the big guys? I believe this is a deliberate decision by DBS because, in my experience, the insurance companies offer a premium based on a percentage of gross income. To my mind, this is fairer. I feel that it is more than reasonable that premiums should be based on the level of business you do because, if you achieve a higher level of business, there is likely to be a higher liability if things go wrong.

Not only that but I have to say I think the increases are unduly high for all but the very biggest firms. Quoting the figures on a monthly basis disguises some of the pain. In fact, a sole trader will be paying an extra £1,572 a year.

The Whitechurch Network will not be immune from higher insurance costs but we believe our increase will be significantly lower than that.

DBS says part of the increase is due to the rise in regulatory costs. These too have seen a significant increase but, while the rise is very big in percentage terms, it only amounts to a few hundred pounds a year.

These days it is very hard for the smaller trader to make ends meet. The burden of regulatory costs and the reduction in margins have hit hard. With no economies of scale, there is little room to absorb such cost increases.

I feel particularly sorry for people who want to start up their own IFA business. I started my IFA career by converting my back bedroom into an office. There is no way that I could do the same today. Not only is that a pity for young entrepreneurs in our business it is a pity for the business as a whole. For networks to penalise the smaller trader in this way is just not right.

But don&#39t get me wrong, I am not having a go at the bigger trader. I take my hat off to anybody who is running a successful business in a difficult environment. They are hardly having it their own way. I believe that they are being charged way over the odds an I further believe that more and more cost-effective networks will spring up to bargain down the costs.

I am sure that Misys is looking at ways to boost profits ahead of the float but it is doing this at the expense of the IFA community. Because such a big proportion of IFAs within a network fall under the Misys banner, it feels that it can act as an oligarchy.

This is heightened by the fact that it fosters the impression that it is difficult to move from network to network. This is not true. We now have 160 members on board or in the pipeline. All but one firm has come from another network.

Perhaps the FSA should make it issue a statement along the lines of the new annuity rules, telling members that they could get a better deal by shopping around.

I can understand that Misys wants to make a reasonable profit on the float and good luck to it. But I feel that it is not reasonable to raise charges in this way.

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