Hopes of limited liability for intermediaries have been dashed as the Financial Advice Market Review final report does not recommend the introduction of a fixed 15-year long-stop.
According to the review, such a long-stop could limit the protection available to consumers on long-term investment products.
Following the Call for Input to the review, it became clear that some respondents felt strongly that the risk of indefinite liability has a negative impact on financial advice businesses.
This included reducing investment and commercial incentives to provide certain types of advice, the document stated.
As such, some respondents were in favour of a long-stop.
However others felt that the introduction of a long-stop “would not reflect the reality of financial services advice,” in that many products sold are for the long-term.
These respondents believed consumers cannot be expected to realise they have a cause for complaint for many years, due to difficulties in assessing the quality of advice.
The Financial Advice Market Review considered claims data from the Financial Ombudsman Service as part of its analysis, which showed that relatively few complaints relating to advice provided longer than 15 years.
If a 15-year long stop were in place, these might be barred, according to the FAMR final report.
The figure estimated by the Fos is to be an average of 216 complaints per year, of which only 30 per cent were upheld.
FAMR’s final report added an estimated 48 per cent of these types of complaints considered by the Fos were concerning advice about mortgage endowment products.
It added given the “historic nature of this specific problem” and “the fact that many of these complaints date from the pre-RDR era” there will be a natural decline in the number of such complaints over time.
As such, HM Treasury and the Financial Conduct Authority will review the data on complaints about advice relating to long-term products as part of the planned review of outcomes in 2019.
ruth.gillbe@ft.com
