The compensation scheme mess is unfair to advisers across the board.There is little balance between what advisers pay and what providers, which rely on that IFA distribution, contribute.
The professional indemnity insurance market may be turning the corner but it has been an obvious example of how a regulatory system which has an inherent bias against IFAs could not be properly served by a free market in indemnity insurance.
Many advisers went out of business because of the harshness and, perhaps more important, the unpredictability of the regulatory environment.
But it is the individual examples that give most cause for alarm. In the case of David Aaron Associates, what exactly was the tribunal thinking when it did not appear to consider that one of the FSA’s own staff had largely given a seal of approval, although not official approval, to the Aaron marketing material.
It may not have changed the outcome but should this evidence not have been used in mitigation?Last week, it became clear that former Glasgow IFA Save & Invest was compliant when selling structured products but an ombudsman ruling – now reversed – had already put it out of business. The potential redress to the IFA is a paltry £900.
The two examples may be extreme and issues surrounding the compensation scheme and PI market complex but they illustrate the fact that the current system is unfair and inflexible.
If advisers are to have faith in the system then justice should be done and should be seen to be done. Money Marketing doubts if either is the case at the moment.