Adviser liability remains a concern: FPA

Issues surrounding adviser liability remain a concern and will be discussed during the next phase of Government consultation regarding investor compensation, according to the Financial Planning Association (FPA) deputy chief, Deen Sanders (pictured).

The FPA has welcomed the Treasury’s newly launched paper on compensation arrangements for retail clients, which suggested the creation of a ‘last resort’ compensation scheme and better administration of professional indemnity (PI) insurance requirements.

However, Sanders said the association would be seeking a further discussion about the extent to which failed investments should be blamed on financial advice given to the client.

“You cannot be responsible for 100 per cent of the loss, because it’s usually a product failure that initiated the loss,” Sanders said.

Sanders said addressing this issue could be part of the solution to the rising PI insurance premiums, which he said were placing increasing pressure on advisers’ businesses.

“It’s increasingly a problem as licensees stick to offset the cost of their increasing PI insurance premiums by transferring that cost to advisers,” he added.

The FPA is also concerned about the possible additional costs of establishing a last resort compensation scheme, as suggested by Richard St John – the author of the Government’s consultation paper.

“They haven’t as yet told us whether they’re going to address this issue or not and that’s why we think it’s appropriate that Richard St John’s paper does identify that this has had a significant cost impact in the UK environment,” Sanders said.