One of the questions from the floor was something along the lines of “With the rise in the claims culture and likely PI challenges, where do you see the future of advice in this area?” My instant response, without thinking, was: “We’re screwed!”
It got a laugh from the floor, but I did go on to say that so long as you have robust systems and processes in place, then there shouldn’t be an issue with future claims.
But, do recent horror stories regarding advisers seeking to renew PI actually see my tongue-in-cheek forecast starting to come true?
We’re lucky enough that, having taken an 18 month policy, our PI insurance is not actually due for renewal until March 2019.
But, speaking with other advisers on their experiences, the renewal process is not a happy one; onerous applications, significant increases in premiums, large excesses and even exclusions on future cases.
One adviser I spoke with was so worried about her renewal that she was actually delighted to see the premium only double.
Others worried that the sheer cost of cover and/or increased capital adequacy requirements might actually drive businesses out of business.
One high profile “victim” has been O&M Pension Advice.
Director Phil Billingham announced earlier this month: “Sourcing commercially acceptable PI cover at short notice has proved impossible”.
That’s maybe one of the higher profile cases, but what about much smaller firms out there? How many others are there facing the same challenges and being forced to throw in the towel?
Of course there’s been a lot in the media regarding quite obviously poor advice, with the sheer numbers of British Steel pensions meaning that their cases in particular are hitting the headlines.
But all firms, good or bad, are being tarnished with the same brush. Good processes and differentiating between at retirement and pre-retirement transfers seem to count for nothing (though on the latter point, some insurers do seem to have updated forms more recently to differentiate between the two scenarios).
O&M had apparently never had an advice complaint and had completed a full review with the FCA in 2017, resulting in only minor process changes.
In stark contrast, I’ve heard of one firm (completing a huge amount of DB transfer business) that gets all clients to sign a disclaimer to confirm that they only require advice on this one area and don’t wish to discuss or disclose any information in relation to any other matter.
These are the advisers that should be being hammered PI insurers. Why aren’t they focusing more on ensuring good processes?
So, lots to be thinking about as my team and I finalise our budgets for the coming year, what figure do we put in for PI and how long will the forms take to complete?
Nicola Watts APFS Chartered Financial Planner, Chartered Wealth Manager, CFPTM Chartered FSCI - director of Jane Smith Financial Planning
After joining the family business in 2000, Nicola qualified to provide advice in 2001, and has been a director of the business since 2006. Since the retirement of her mother (Jane Smith), Nicola bears sole responsibility for the management of the firm, and the advice provided to clients. Nicola is married to David and has two young children, Emily and Olivia, and Poppy the black labrador.