Unlimited liability pushes up costs and pushes out IFAs

Unlimited liability pushes up costs and pushes out IFAs

A Dorset-based financial adviser who has sold her IFA firm and retired early has cited rising PI insurance costs and the spectre of unlimited liability as something that will haunt her into retirement.

Helen Kanolik, who earlier this year sold her adviser firm HelenK Financial Advice to Dorset-based chartered firm Strategic Solutions Financial Planners, said she would have to continue to pay PI during retirement in case of any complaint.

She said: “I do not want to have an indefinite liability hanging over me. I am wondering what the future holds, and while I do not expect any complaints, I live with the knowledge that anything I did means clients and their families could come back to me and potentially go after my estate.”

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The former certified financial planner, who was accredited by the Society of Later Life Advisers, said that in addition to paying PI, she was also stung by a Sipp levy in April.

“I ran my own company for the past five years so am responsible for all I did in that period for the rest of my life, and there is no end to it. I have no idea if PI costs will rise and for how much how much longer I will have to pay,” she added.

Ms Kanolik said she supported Apfa’s long-stop campaign, adding: “If there were a long-stop after 15 years say, perhaps it would focus the minds of clients to think more carefully about what they are doing because they know they could not complain after that period.”

Stephen Hagues, founder of Retiring IFA, agreed that PI costs have become higher over the past few years, contributing to advisers desiring to sell up and retire.

He said: “Rising PI costs are one of the top five factors quoted by advisory business owners looking to sell their business. The costs are rising in all professional sectors but the cost of cover in the advice sector seems to have disengaged from the accountancy sector by some margin. The lack of a long-stop and an increase in blame culture are possible factors.”

Chris Hannant, director general of Apfa, said: “We have seen PI premiums rising steadily over the past few years. We are working to get a better deal with the regulatory authorities on the liabilities through a long-stop and ensuring advisers get a fair deal at the Fos.

“We are also looking at the worrying precedents being set on liabilities on Sipps – advisers who set them up cannot be held accountable for everything that is subsequently done with them.”

Network responses

Caroline Bradley, group finance director of Tenet, said: “We employed an in-house council to defend unjust claims and challenge Fos where appropriate. However, we frequently see claims where the firm giving the advice no longer exists and the claimant is looking for another firm to blame.

“The FSCS levy is unfortunately out of our control but the recent £20m interim levy on life and pension advisers, combined with the massive rise in the final levy for the coming financial year, does not reward good behaviour for the majority of firms and we are working with our trade and industry bodies to highlight this as a serious concern.”