For those on the receiving end, there is the stark realisation that under FOS, they have no protection against claims for acts of advice given more than 15 years ago. We are probably the only people in the UK without such protection. Other professionals rely on the Limitation Act 1980 if old advice comes back and bites them.
Against that backdrop, I have some sympathy for those people campaigning for the introd-uction of a 15-year long stop to be included in the FOS rules but there is a weakness in their argument yet it is one that can easily be fixed. Let me explain.
I bought and sold my first house more than 15 years ago and my second and I used the services of an estate agent and a solicitor each time. The estate agent got a commission and the solicitor a fee. Both were expensive but there you go. Fee or commission, it was still money – my money.
The thing is they only charged me once per transaction. Neither wanted an ongoing payment based on the value of my property for as long as I owned it. On the other hand, let’s assume I was a regular punter and was advised to take out an endowment mortgage.
Someone, somewhere would still be getting renewal comm-ission despite the fact that the house has been sold, the mortgage redeemed and I have moved away from the area. Quite possibly, I have never subsequently spoken to that person since the policy was sold.
It is the same with trail commission – someone some-where getting an income, even when they have not had any contact with the client for several years or more.
Why, there are even people who have retired, with no intention of servicing clients, who are no longer authorised to give advice and yet still get renewal commission. What is this payment for? Is it for ongoing servicing and does this include advice?
It cannot be right that someone can continue to get money for contracts sold 15 or 20 years ago, then demands long stop protection.
The argument for a 15-year long stop would have far greater weight if renewal and trail commission was renewed annually as part of an ongoing service agreement.
In itself this is not an easy solution. I have been switching off renewal on old legacy contracts where I no longer have an ongoing relationship (with either the client or the insurance company) but the only winners in these instances are the insurance companies. Turning off renewal seems to line the pockets of the insurance company, not the policyholder.
Dennis Hall is managing director of Yellowtail Financial Planning