It is better to be directly authorised than on a network for professional indemnity insurance purposes, as a network can only provide a one-size-fits-all policy, Peter Turner has said.
The director of Dispusolve, a Berkshire-based dispute resolution service for IFAs, said: “A DA firm can be dissolved on the retirement of its owner, who can them simply walk away. It is not a landing aid, it is a parachute.”
He said that while a network may be able to secure a more competitive premium, and could be less susceptible to insurers refusing to cover certain classes of business, a network-led PI cover tends to be a one-size-fits-all policy.
For Mr Turner, the biggest issue was that while an IFA can retire and close his firm, a network remains in existence and open to complaints.
He added: “Another particular complaint I have heard is advisers finding out too late that there is an excess of £15,000 which in many cases means the PI provides no protection at all because any redress is less than that.”
Last week Helen Kanolik sold her IFA firm citing rising PI costs and the threat of unlimited liability as a retirement worry. Ms Kanolik said she had to continue to pay PI during retirement in case of any complaint.
Stefan Fura, director of Leicestershire-based Furnley House, said: “We recently left a network to become DA. When we were with the network PI was bundled into the charges so it was difficult to make sense of what we were paying. It is not as bad as we expected as a DA firm, but we are a new firm so we have no legacy. The big issue affecting PI costs is the current lack of a long-stop.”