44% of adviser firms affected by open-ended liability would like Professional Indemnity (PI) run-off cover but say it is too expensive, according to new research commissioned by AIFA and Zurich.
The research is part of the ongoing AIFA and Zurich backed ‘Fair Liability 4 Advice’ campaign, calling for the introduction of a long-stop for the advice profession.
It found that a further 30% of advisers say PI is not available to them.
78% of advisers agree that less expensive professional indemnity run-off cover is the best option for the profession, while 58% believe that converting your business to limited liability status to reduce exposure to future personal liability is the best option.
The research also found that 70% would consider an agreement with the Finanical Ombudsman Service whereby the clock is reset during a face-to-face review with the client (i.e. liability for earlier advice ends).
When asked how they currently deal with open ended liability 37% of advisers say they just live with it and accept they will take it to the grave. While a similar number (39%) of advisers use, or plan to use, professional indemnity insurance to cover them.
“It’s wrong that advisers have to accept they will take their liability with them to the grave,” said Richard Howells, Zurich’s intermediary sales director.
“IFAs are doing an enormous amount of work to make sure they operate better businesses. They are providing a better service to their clients, a clearer explanation on costs and ultimately a higher value in the business. But if that value is being eroded because they cannot even calculate their liability then it leaves the market open for predatory buyers to drive down the value of IFA businesses.”
Chris Hannant, policy director at AIFA, added: “The level of consumer complaints about advisers continues to fall. The latest figures from the Ombudsman show the number of complaints against IFAs has fallen from 3,092 to 2,643 for the 2011/2012 financial year. IFAs now represent just 1% of all FOS complaints.
“It is extremely positive that complaints against advisers continue to fall and shows advisers are looking after their clients. The regulator needs to recognise this in its approach to the profession.
“Advisers have responded to the demands of the RDR and the FSA needs to deliver on its promise of a regulatory dividend for firms. Unlimited liability of advice and rising PI premiums, due to the retrospective actions of the FSA, are damaging the profession. It’s clear PI cover is rising in cost despite the positive actions of advisers. The regulator needs to act and deliver a fairer outcome for the advice profession.”
