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Mmm? Well there are two parts to that: Did you not understand the large company rule? Did the life company fulfil its obligations?

It appears that many advisers were not fully aware of the large company rule, and as unfortunate as they make think it is, they will be facing some sizaeable claims on the PI.

Advisers have a duty of care to understand this, particularly where they are paid for this advice by whatever means.

It is a complicated area, but there are many advisers who called themselves experts who should have known what they were doing and had due diligence. Apologies gentlemen, that is your job.

Notwithstanding that, it is also clear that providers may not have fulfilled their obligations.

I saw one report where the adviser was saying that the broker consultant did not know the answer. Are you saying that you were relying on a broker consultant for your advice? You are the adviser, and it may slowly dawn on you that someone who is paid only if you invest should not be held responsible for the advice you give.

One complaint by an adviser explains that the FSCS risk was not explained to them anywhere in the client literature. Why would it? It is their role simply to say that it is covered by the Manx FSCS or the UK FSCS.

It is your role as an adviser to understand what that is and familiarise yourself with it.

However the corporate investor that is the life office who is classed as a large company, does have a duty of care and advisers should consider this.

As we know an investment in an external fund through a bond is not covered by the FSCS, nor is the cash account referred to above. Those who invested into structured contracts will also be clinging to the wall now, hoping the underlying protection provided by the counterparty risk is of a high quality, or they face losing everything via that same large company rule.

The FSA expects that large companies do due diligence on fund groups, banks and so on. A life office in this instance would be classed as a large company.

The life office has the responsibility and regulatory duty to ensure they have the appropriate measures in place to ensure the customer is protected. They should be ensuring the external arrangement is financially strong and evidencing it. Remember this is as true of external funds and the counterparty within structured contracts as it is about the bank account.

And so we land at the life office door and ask the question: What due diligence did you do on Kaupthing? If this diligence is not satisfactory, then you should be asking them to take action and reporting them to the FSA.

Whilst the association of international life offices says that IFAs must have been blind not to know about the FSCS issue, I wonder how their eyesight was when they did their due diligence. That trip to Specsavers may have saved IFAs, customers and themselves a lot of hassle and money.

Peter McGahan is managing director of Worldwide Financial Planning