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IFAs told to cover their backs on with-profits

IFAs who do not have evidence that they have reviewed whether to switch all with-profits policies could be in breach of their duty of care to their clients.

IFAs have been warned to cover their backs by reviewing every with-profits policy held by their clients, as failing to switch policies could be deemed as bad as selling them.

O&M Systems director Graham Miller says

Miller warns it is no longer good enough just to say you do not sell with-profits policies and advisers should be actively looking to switch if a review shows that a client’s money could be better placed elsewhere.

He says advisers should make a priority of a review of all policies, using AKG actuarial star ratings, starting with the lowest-rated policies, such as NPI.

Advisers should then move on to middle-rated policies, such as GRE and Scottish Mutual, before looking at higher-rated policies such as Prudential and Standard Life.

Miller says: “Advisers have a duty of care to their clients and need to act now to avoid storing up problems for the future. Sitting on the fence is no longer an option. If you ignore with-profits policies by not reviewing them, it is as bad as misselling.”

Benson McGarvey financial planning manager Steve Martell says: “There is a danger in not having a proper review process in place although practical problems have to be overcome. Advisers cannot bury their heads in the sand about policies that they have sold.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “These views seem to be consistent with those held by the FSA on the issue.

“Advisers should at least alert clients to the fact that policies may not be the same as they were five or 10 years ago in terms of investment characteristics.

“This process could become very labour-intensive but IFAs cannot ignore the issue.”


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