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Zurich supports Apfa’s regulatory dividend call

The UK intermediary sales director for Zurich said that it was clear that many advisers had not grasped the potential impact of an unlimited liability on the value of their business.

He said the insurance provider was still working with the Association of Professional Financial Advisers in its discussions around a long-stop or some form of improvement to the professional indemnity insurance regime.

However, he said there were a “number of stakeholders” that needed to be engaged with when it came to the creation of a long-stop – not least consumer groups, who had also raised with the FCA and the Financial Ombudsman Service the potential detriment of reducing their ability to claim.

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He said that the issue had been raised that if a long-stop were to be implemented, it could not just cover advisers, but it would have to cover the entire industry and all stakeholders, such as banks.

In this case, it could be seen that customers should be able to claim in the event of a potentially billion-pound mis-selling debacle coming to light several years after the products were sold, such as the mis-selling of payment protection insurance.

A long-stop applied in law across the industry could have prevented customers from being able to claim redress against the banks, for example.

Mr Howells said: “Long-stop has opened the debate and it is right to continue discussions on it. But we are looking for ways to help intermediaries build value in their business.”

Adviser view

Richard Howell’s comments came as Apfa issued a call for the FCA to bring in a regulatory dividend for financial advisers. Chris Hannant, director general of Apfa, said the dividend would reflect the new financial advice sector post-RDR and reduce the regulatory burden on advisers.

He said: “There are a number of steps we think the FCA can take to reduce the regulatory burden on advisers, both directly, in terms of fees, and indirectly, in terms of supervision and compliance. We’ve set these out very clearly to the regulator, and we will be producing a regular flow of evidence so we can hold them to account on each one.”

Five ways the FCA can help advisers:

1) Reporting requirements – streamline the data it collects from advisers, and increase reporting time from 6 weeks to 3 months.

2) Consumer credit – the FCA takes over responsibility for consumer credit in 2014, and Apfa is calling on the FCA to ensure its regulatory approach reflects the different types of risk different firms present.

3) Long-stop – the then-FSA gave a commitment to Parliament that the FCA would consider whether to investigate the case for a long-stop as part of its business planning for 2014/15. Apfa is calling on the FCA to make good on this commitment

4) FSCS threshold for investment intermediaries – Apfa believes the case for increasing the FSCS threshold needs revisiting in light of the fall in adviser numbers.

5) Post-RDR, the reduced risks to consumers means that less regulatory resource is needed to supervise advice firms and this should be reflected in the costs the FCA allocates to advisers to reduce their share of the bill.