The ICS says it does not investigate why the firms went under but some 80 per cent of the cases the scheme covered during this time due to phase one of the pens-ion review.
This raises the spectre of further casualties among the IFA community as the second phase of the pension review gathers pace with the inevitable consequences of firms going to the wall.
As the phase one cases tail off to be replaced by phase two cases this autumn, the question on everyone's lips is how many IFAs are likely to go to the wall due to the effects of the second phase?
The ICS annual report reveals that, of the 1,321 firms declared in default since the inception of the ICS 12 years ago, 595 or 45 per cent were declared in the year to March 31, 2000. Over 90 per cent of these firms were IFAs, leaving a total of around 9,500 IFA firms in operation, according to Aifa.
The report also shows the number of claims completed to the end of March 2000shot up by 130 per cent on the previous year to 7,966 from 3,480. It expects no let-up inits work rate for the nexttwo years.
The ICS cannot say whether the number of defaulters will stay so high during the coming year until the new phase one caseload is dealt with. But the early signs are clearly worrying for many IFAs, with 123 new default declarations since March.
Why is the casualty rateso high among IFAs?
Reynolds Porter Chamberlain solicitor Tracey Butcher believes the main, but not the only, culprit for the IFAs' demise seems to have been professional indemnity insurance.
She says: “I can think of a number of reasons. Many IFAs will have just had enough. Others have had problems with their PI cover or, even if they did have insurance, may not have been able to meet their policy excesses which went up rapidly as the review progressed.”
The situation was made worse by the fact that many firms only notified their insurers in dribs and drabs, seeing premiums and excesses goup each time.
Others left things till late in the day because they thought they had to. They were under the impression they should notify insurers only of a caseif it was non-compliant or it got to the loss stage.
Pension Advisory Support System chief executive Mark Penton says the ICS fig-ures tell a different story on closer analysis.
Some 1,210 of the bankrupt firms were Fimbra-regulated, which Penton says indicates they probably went under before the pension review kicked off, for a variety of reasons such as the Financial Services Act and the cost of compliance.
Even so, he admits phase one “clearly had an impact”.
IFAs will want to know if they are in for an equally rough ride during phase two.
Butcher says: “There are no statistics to show the size of the average claim. If wedid, then we would have an overall idea about liabilities.It is not far enough downthe line to tell.”
It may well be different this time round. The shock that came with phase one of the review is absent and administration and support schemes are in place.
Penton says: “There is every sign that IFAs are dealing with it better than in the past. They have a better understanding of how to deal with it and there are things like our loan scheme available which still has two-thirds of its money intact.”
He sums it up: “Phase two will have an impact but it will not be the straw that breaks the camel's back.”