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Has PI cover ceased to be?

Those of you around the apocryphal average age of the IFA will no doubt recall the Monty Python gag involving the Spanish Inquisition. As I recall, the punch line was: “No one expects the Spanish Inquisition.” In the same vein, I am sure not many expected the arrival of a consultation paper on professional indemnity insurance but arrive it has.

In due course, IFAs will in a position to ask questions directly of the team responsible for this process of consultation. This allows us to take part in the process verbally, which is a welcome initiative from the FSA.

Please do not fail to take advantage of this opportunity to make your point and understand the issues faced by the regulator handling a problem that is historic rather than of its own making.

I say historic as this issue dates back to the pension review, where previously acceptable advice and processes were determined to be defective.

Defining misselling by using hindsight has no place in a well regulated market and it is the definition of misselling which will challenge the regulator in a way that no other issue is likely to do.

Now that we are in consultation mode for professional indemnity, we need to ensure that the statistics on which any conclusions are based are accurate and reflect the true position. The importance of this cannot be underestimated.

An important part of the consultation concerns capital adequacy although I believe that it focuses on this from too narrow a viewpoint, concerning itself with the concept of the big firm being able to opt out of cover thorough recognition of its higher level of capital adequacy.

Lest we forget, the EU also has an interest in capital adequacy. This was first brought to our attention by Garry Heath, who promptly recognised the conflict between the European market and the UK.

The Europeans favour an increase in the current level or, in the worst-case scenario, a move to this level of adequacy being per adviser and not per firm.

Having had a fair bit of contact with fellow advisers in other EU countries, they too have issues with some of these changes, as most of the proposed alterations seem to primarily favour the banks. Familiar?

It is also true to say that some of these proposals would simply reduce choice for the consumer and, more important, probably reduce quality at the same time.

We do not operate in a vacuum. Neither the IFA community nor the FSA can ignore what is going on in Brussels.

What we need is a solution that will last and allow us to get on with what we do best – giving advice and not broking professional indemnity insurance.

Returning to Monty Python, we need to ensure that professional indemnity insurance is effective and not the equivalent of a dead parrot.

To overcome the problems we currently face, we need to ensure that we take part in the debate looking forward and not to the past.


Barclays Bank – Managed Fund of Funds Isa

Wednesday, March 5 2003 Type: Oeic mini or maxi Isa Aim: Growth and income by investing in equities and bonds Minimum investment: Lump sum £500, monthly £25 Maximum investment: £7,000 Catmarked: No Investment choice: JPMorgan Fleming Luxembourg, Baring global bond, Threadneedle UK corporate bond, Investec sterling bond A, iShare iFTSE 100, Merrill Lynch UK dynamic, […]

With-profits bonuses cut by L&G and Axa

Axa and Legal & General have slashed with-profits bonuses by up to 23 per cent and 20 per cent respectively.Axa&#39s move means that a 25-year £25 a month endowment will be worth £60,373 at maturity, which is 23 per cent less than the £78,666 it would have paid out a year ago.The equivalent L&G endowment […]

Prescription for a healthy industry

So CP166 has driven a ramrod through the whole concept of polarisation. This is where my 22 years in financial services come back to haunt me.In 1985, I worked as a broker consultant for NEL Britannia (now Unum), which was renowned for its market-leading permanent health insurance contracts. I spent much of my time calling […]

Property home for pensions

Teather & Greenwood is setting up a pension investment vehicle which will be listed on Aim that invests in the London residential property market.Property Investment for Pensions plc qualifies for self-invested personal pensions, small self-administered schemes and funded unapproved retirement benefit schemes. It will list in April and proposes to raise up to £20m, although […]

Cricket - thumbnail

England vs Australia: pensions

Well, the cricket season is here, and England and Australia are stepping up to the wicket. Although we compete with each other in the sporting world, when it comes to pensions, Australia’s pension programme is held up as a model for our auto-enrolment initiative. Auto-enrolment was introduced because people weren’t saving enough into their pensions, and it is still early days but signs are positive. However, in Australia, saving into a pension is compulsory, and in fact employers are the ones who have to pay in. Employees in Australia can make additional contributions into their pensions, but they don’t have to. Should the onus be on the employer or employee to save? Well in the UK we think it’s both, but to get ‘adequate’ savings for retirement it’s the employee who has to pay more in.


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