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PI firms warn IFAs over endowment clients

Professional indemnity insurers are warning IFAs not to proactively contact clients about endowment mortgage shortfalls amid concerns that they could fall foul of their PI cover.

However, IFAs claim the advice is short-sighted as it would be better to advise clients to take action now on potential shortfalls rather than wait until endowments mature, when a complaint is more likely. They also say PI insurers are preventing conscientious IFAs from doing their job.

IFAs have seen PI rates rocket and terms toughen at the same time as some life companies have revealed that as many as 80 per cent of endowments could face shortfalls.

Chubb Insurance Company assistant vice-president Jona-than Kennet says he is concerned that IFAs could be unintentionally admitting liability if they contacted clients or issued mailings on endowments.

PYV claims director Robert Bass says: “Insurers are not terribly happy with IFAs having a &#39kick me&#39 sign on them. There is no regulatory requirement for advisers to mail clients about shortfalls. IFAs can give advice when they see the clients to service investments.”

Kangley Financial Planning managing director and Aifa council member Geoff Kangley says: “I understand the PI insurers&#39 nervousness and advisers have to exercise extreme caution.”I want to write to clients to advise them to take action now to mitigate their position but the insurer is against this as it could incite complaints. The adviser is left in an invidious position.”

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