PII broker PYV has warned depolarisation could unwittingly attract negligence claims for IFAs because of an increased in compliance and risk management requirements.
PYV is specifically warning professional indemnity insurance premiums could yet climb further as the FSA’s 130-page document on requirements for the new depolarisation regime was released only a month ago and may not give firms enough to meet the June 1st enactment deadline for implementing new compliance procedures.
According to Hilary Wilkins, COO at PYV, the legalese contents of the FSA depolarisation policy document are sufficiently ambiguous to make it difficult for intermediaries to know how they should operate, under what terms they may have ‘exemption liability’ and, more specifically, what they ‘can’t do’ as opposed to what the FSA says they ‘can do’.
In particular, Wilkins points out Policy Statement 04/27 – Reforming Polarisation: implementation - does not explain how to handle a client meeting, or what paperwork to issue, in situations where the firm holds both independent and multi-tie adviser status but does not yet know what advice or guidance the client will require.
As a result of the complexities of handling depolarisation, the PII industry is still itself trying to assess how to manage potential IFA claims, says Neil Pointon, director at PYV, because an increase in claims could lead to an increase in PII premiums.
“It is also not widely appreciated by consumers that an adviser can currently act as an IFA, a single tie and a multi tie, thus wearing several hats in front of the client, supported by different business cards. Unless carefully staged this may add to customer confusion about the service the adviser can offer, and potentially attract claims from misleading advice. And, in time such claims may result in increased premiums,” says Pointon.
“In addition, the insurance market has not yet agreed a standard approach to covering multi ties. It is still to be seen whether they will seek cover in the insurance market or, like tied agents, look to pass on any liability and the onus of arranging cover on to the product providers involved,” he adds.
In order to try and manage any pitfalls which could arise for intermediaries falling foul of FSA rules rather than through giving misleading advice, PYV has now is offering to broker a PII solution for IFAs with Chubb, which aims to “plug the gap” and carries automatic inclusion of legal costs where a firm needs to defend its position as a result of errors in meeting FSA regulation.
Contact PYV on 020 7626 6789 or by email - [email protected] for more information.IFAonline
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