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FCA rejects advice long-stop

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Advisers will not be given a long-stop protecting them against future compensation claims, the FCA says.

It considered introducing a 15 year limit on financial advice liability as part of the FAMR – published today – but concluded “this would not be in the interests of consumers”.

It says this was a particular risk in relation to long-term products.

The review also considered a variable long-stop linked to the terms of individual products.

But it says the limited benefit and complexities faced by the FOS as a result meant this was not a proportionate response.

However, the FAMR does recommend the planned review of FSCS funding explores reforming funding classes, whether firms’ contributions could be smooth, and the introduction of risk-based levies.

In addition, the report warns smaller advice firms are struggling to obtain adequate professional indemnity insurance at an affordable price.

This is turn is leading to more firms failing and falling back onto the FSCS and the FCA should consider reviewing the relationship between PI cover and the FSCS, the review says.

Old Mutual Wealth chief distribution officer Richard Freeman says: “High-cost and unpredictability in the FCA rejects advice longstop levy has become a burden on adviser firms, prohibiting small business owners from investing for the future.

“The FCA and Treasury have today recognised these concerns and we believe that a more proportionate FSCS levy on advisers will help create economic conditions that allow firms to grow.”

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Comments

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

  1. And that’s exactly why anybody with any interest in protecting their assets and long term sanity will at least avoid giving advice in any potentially tricky areas, which these days is a long list. Better still, deregister to give advice, offer guidance and pass the advisory bit, if required, to an arms length authorised person on a profit share basis. The MAS has demonstrated that guidance can go a very long way before it becomes advice. One thing is certain, the claims chasers will be delighted to hear this as advisers will be pursued into retirement and care homes for decades to come. You have been warned.

  2. It’s politics not justice.

    The 15 year clock SHOULD start ticking when the consumer ceases paying for ongoing advice. If the consumer FAILs to take advice for 15 years and then complains, why should anyone have to defence against a stale complaint. The solution was there and available by linking it to the advisers ongoing service agreement and it’s termination.
    The injustice continues for political reasons alone.

  3. How many PI insurers are likely to remain in the market for indefinite run-off cover? And, of those that do, how many won’t withdraw cover for selected classes of business at the first whiff of yet another regulatory review (or the exposure of yet another failure of regulation)?

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