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MPs kick-start debate over advice liabilities


MPs are pushing for a debate on limiting the liabilities of advisers in order to increase the availability of advice for people with limited savings.

During a Work and Pensions select committee hearing last week, MP Craig Mackinlay suggested a £50,000 floor for full liability for advisers, and pressed both Treasury minister Harriet Baldwin and witnesses from the FCA to provide an incentive to support those with smaller pots.

While Baldwin responded that this would be considered by the Financial Advice Market Review, FCA director of policy, risk and research Chris Woolard said a regulatory safe harbour would be “a step too far”.

He said: “One of the issues we will need to think about within the FAMR review is whether there is something that is clearer and simpler both for consumers and advisers.

“But there’s a further jump there to somehow create a safe harbour where you can give someone advice and charge for that and not take some responsibility for the advice you’ve given, and that feels like a step too far.”

The regulator has committed to publishing a paper on a potential long-stop by the end of 2015.

Apfa director general Chris Hannant says any reform must balance improvements for a number of people, and potential losses for consumers unable to receive full compensation.

He says: “This is one of a number of routes that could help limit liability and therefore make it easier to offer a wider range of advice to consumers.”

But Pilot Financial Planning director Ian Thomas describes a £50,000 floor as “arbitrary”.

Retirement Advantage pensions technical director Andrew Tully adds: “We have long talked about simplified advice and whether we could have some kind of light touch offering for small pots. This could be part of how that might work, but it isn’t a catch-all solution.”



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There are 6 comments at the moment, we would love to hear your opinion too.

  1. A limit on advice liabilities is an interesting proposal. On the one hand it would make it clear that the adviser stood by his/her advice whilst also giving a clear indication that this is limited and the client is also taking responsibility for decision making. On the other the £50K limit may give CMC’s a target to aim at and could make the FOS more careless (‘its only £50K AND its someone elses’).

    If you were to couple this with extending to IFA’s the same right as clients have to challenge FOS decisions through the courts and we might have a workable system.

    However, given a choice, I’d go with the ability to challenge the FOS through the courts. I think that this has a much better chance of controlling IFA liability.

  2. Like any fair minded IFA I am glad that regulation has cleaned up the industry and is helping push forward the professionalism of the advice industry. However the range of this debate about limiting liability or simplified advice definitions is truly missing the point.

    When I look at my last few years accounts the biggest threat to my business is not the economy or clients leaving me or investment markets or changing pension legislation – it is the regulators and the compensation costs spiraling out of control. This is compensation for things I never did and would never consider for my clients. This is compensation so that the guilty or incompetent can carry on scot-free whilst the innocent IFAs have to charge their clients more to correct the injustices of the system.

    Until these issues are controlled with some form of accountability instead of the ‘free money’ attitude we have now from the regulators, then I am afraid the advice gap is going to grow. Meanwhile Technology will fill some of the gap but it will never keep up and always remain behind the curve due to the speed of changes in the economy, regulations and legislation. At the same time we hear the ABI and Bank Assurers want to simplify the pension freedoms process to allow them to ‘help’ clients. I can tell you the outcome of that little venture now and it involves more scandals and more compensations.

    Meanwhile poor old Joe Public is confused and left directionless by a well meaning but naive bureaucracy both in Westminster and Canary Wharf.

  3. Greg above is right IMHO, and to be fair so is Chris Woolard, I cant be right to put a limit on advice be it £1, £50,000 or greater, I take full responsibility for the advice I give, its all the other nonsense that we have to do and pay for which is wrong ?

    I don’t want to be absolved liability, I want to be treated fairly and not abide and be charged by some bureaucrats notion that this is the way it has to be because he/she hasn’t got the fortitude to do whats right !

  4. £50k? But I would still need to charge my time at a rate which encompasses all of the other regulatory fees and overheads. It’s not just about liability alone, it’s the partnership of liability and regulatory overhead and requirements. Removing one layer of the equation doesn’t half the cost of delivering advice and that is the irreconcilable issue. I think we can guess the preferred outcome, simplified advice from certain larger institutions such as banks, look what happened when Mr Wheatley took a hard line against them!

  5. Why don’t the FCA remove these clients from their money grabbing calculations by cutting their costs back?

    They didn’t want rich clients subsidising poor ones through commission, but at some stage they have to accept that our society is based on this concept. The way they charge us fee’s is based on the successful paying more than those that struggle.

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