PI dilemma returns with the same old problems

I set up my own firm in August 1998 and, as far as I can recall, I was asking the question in 2000 or 2001. I had little legacy business. My business was started after the pension transfer review, so there were no ‘are you owed’ skeletons in the closet. The zero dividend preference share ‘situation’ was not yet on the radar.

I was one of the early adopters of fee-based financial planning. All right, I always knew that this was no guarantee that I would never make mistakes that my PI insurer would have to cover me for, but the separation of the product sale and the income generation did seem to me at the time to suggest a lower-risk model, less dependent on commission-based selling.

I was a certified financial planner and had Personal Finance Society associateship, again no barrier to a notifiable event, but surely it must make some difference to assessing risk in my business? No. Having higher qualifications made no difference to how my PI proposal was assessed, neither did following the six-stage financial planning process, working out cash flow, loss tolerance, required rates of return, viability of alternative strategies and so on.

Of course the biggest problem was that in those days you submitted your policy document with the annual data and if you had no PI cover, you did not trade.

What was most interesting when I first wrote the article, and then spoke at a PIA forum on the subject, was the reaction of other advisers. Most commented how brave I was for sticking my head over the parapet.

With the naivete of youth (aged 35 and three-quarters) I had no idea that this was what I was doing. I gave no thought to the regulatory retribution that might be visited on me for simply asking a question. But I was nonetheless surprised at the reaction.

I gave no thought to the regulatory retribution that might be visited on me for simply asking a question.

Unless you ask these kinds of questions how else will any of the 5500 small adviser firms know what life is like for the others? And if no one ever asks the questions, at least not publicly, then each and every firm is out there on its own, with no knowledge of other businesses facing the same issues and concerns, or finding solutions to their problems.

The common excuse for saying or doing nothing is fear of the regulator punishing those with big mouths or loud voices, but I have never subscribed to the belief that the regulator has the time, resources or inclination to mount vigilante campaigns.

But the most interesting thing to me is that 10 years later we are replaying exactly the same discussion about PI cover: cost, availability and terms. Nothing has changed. And maybe it is because still only a small handful join their voices with those who do speak out, in which case maybe nothing will ever change.

Gill Cardy is managing director of IFA Centre