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Taking a slice of the mutual PI

The FSA looks set to formalise its proposals for a mutual PI scheme for the IFA industry.

If such a scheme gets off the ground, the regulator will have proved itself capable of the management of at least one crisis and will receive widespread acclaim from advisers.

The flexibility demonstrated by the regulator in examining IFAs on a case-by-case basis is also to be welcomed although this is cold comfort to smaller IFAs, many of which have had few or even no review claims, but have not managed to obtain cover nor get a waiver.

It is also clear that the regulator&#39s room for manoeuvre on the PI issue may be restricted by the increasingly hostile coverage from national newspapers warning investors that many IFAs do not have PI cover.

The FSA would argue that it has only extended dispensation to firms which it is confident have the ability and the balance sheet to effectively self insure.

But in such a hostile investment climate, it is difficult to see the ad hoc approach being acceptable for any more than the next 12 months.

It is imperative that any mutual scheme moves quickly from the drawing board and into existence so that good IFAs are not forced out of business.

Money Marketing is concerned that such a scheme will require extensive financial support from product providers which are under financial pressure but the providers should take into account that IFAs will remain a significant channel and to neglect it does not make business sense.

IFAs may have to accept a proportion of the costs, which could be the harsh reality of creating a sustainable PI system.


Crisis points

It has been much trumpeted in the national press but is there really a pension crisis? Stammers: I believe there is and it is a crisis of confidence. Consumer trust in the pension system is at an all-time low and employer commitment to work-based provision has been greatly reduced by financial pressures and red tape. […]

Smooth move as going gets rough

The with-profits bonus declaration season is in full swing and there have been some big cuts in bonus rates. The cuts will be disappointing to policyholders and may lessen the attraction for new investors. What has been happening and what is the impact for new investors in with-profits? Putting investment conditions into context, last year […]

Sue Summers

Turning The Exchange into more than an IFA quote engine is the challenge for managing director Sue Summers. Achieving the goal of full end-to-end processing for intermediaries would mean success for the woman who has spent 22 years working to smooth out the sales process. She says she often thought her career would take her […]

Regulator to lower limit for waiver and offer offset

IFAs would be able to offset their professional indemnity insurance excess against their capital reserves and firms with annual turnovers of £10m or more would be exempt from PI cover under proposals outlined by the FSA this week. Director of investment firms David Kenmir says the 5 per cent of IFA firms with £10m or […]

Derek Stuart: where to find value in the UK?

Derek discusses a number of Œself-help stories as examples of where he is finding good opportunities in the UK With the FTSE trading at historically high levels, many investors have questioned whether UK equities continue to offer value. But, as Derek points out, the headline figures mask many opportunities at a sector level. He has […]


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