Garnier takes quest for long-stop to parliament
Leading Tory MP Mark Garnier is joining a Financial Adviser campaign against restrictions on professional indemnity cover for IFAs.
Mr Garnier has vowed to raise the long-stop issue in parliament as part of a “two-pronged attack” to help IFAs struggling with getting PI because of unlimited liability.
The Conservative MP for Wyre Forest and Treasury select committee member said he will ask the government why IFAs face open-ended liability, in contrast to other professions, by submitting a written parliamentary question.
Mr Garnier, a former investment banker, said: “The IFAs I know are good and work incredibly hard for their clients, going out and providing an extremely important service. It doesn’t matter whether advisers are right or wrong, but they enter into this absurd process of redress. If they cannot afford to pay for insurance or insurance companies are not prepared to give them cover because of a piece of legislation, what we are ultimately doing is driving people away from what we want, which is having high-quality IFAs at the lowest possible cost.”
Mr Garnier noted that the UK has one of the largest indebted populations in the world in terms of personal debt, coupled with a system that is making it increasingly difficult for people to get financial advice.
He said there was such an “aggressive” feeling against financial services now that IFAs would be perceived in the same light as fraudulent bankers, regardless of whether or not the IFA has always treated its customers fairly.
Mr Garnier said: “With all the recent scandals, consumers are in an absurdly litigious mood and I fear people will turn around and blame their advisers.
“Clearly it is a big deal if IFAs find themselves sued when they are 95 years old because a pension scheme sold back in 2005 doesn’t work out.”
He added: “I will also write to the ABI and see what it has to say. A two-pronged attack would be great.”
The FSA has said it may look at whether a long-stop should be implemented and will review this “at some stage”.
However the regulator reiterated its view that a long-stop would not benefit consumers or advisers.
A spokesman for the FSA said: “At the moment, we are unconvinced that the introduction of a long-stop would have benefits for firms and consumers. We also don’t see that there is a huge hardship for firms not having one.”
The watchdog’s denial came as national IFA firm Honister Capital Limited went into administration this week over its inability to get affordable PI cover.
More than 900 self-employed advisers had their permissions revoked, according to a statement from Honister’s chief executive Colman Moher, who said: “It is with great regret and sadness we have to inform you that, we have been unable to obtain PI insurance which means that Honister Capital Limited and its subsidiaries has entered administration and will cease to trade immediately.”
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