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Recurring PI Royal abdication

It would be extremely unfortunate if “indiscriminate” conditions applied by professional indemnity insurers began to erode an IFA’ ability to recommend a full range of investments. That is the threat from problems over split caps.

The Aitc is discussing the situation with Aifa and other organisations, presumably the regulator and PI insurers.

As in the past, it appears the PI market is reacting after the event and may be overreacting. Some split caps went into meltdown months ago but denying cover to IFAs for the whole sector will not do anything to solve that problem.

There are fears that IFAs could be restricted in their ability to recommend not just uninfected splits, where there have been some obvious bargains, but precluded from the whole sector.

PI insurers have every right to be cautious about the risks they bear but in a market where they hold most of the cards they must be careful their decisions are based on fact and not as the AITC has warned on an “indiscriminate” view.

IFAs are telling investors to get out of Royal & Sun Alliance, if you believe some national papers.

No. Some IFAs, including one or two of the UK’ biggest, are telling investors to get out of Royal & Sun Alliance, with one citing lessons learnt from Equitable Life.

Others are advising many investors to stay put due to the double whammy of MVRs and exit penalties.

We think this means that advisers are split. Newspapers should be careful when they reflect a sector’ opinions about something as fundamental to an investor’ interests as transferring out of a with-profits fund.


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