The Financial Conduct Authority is more likely to lean towards an insurance solution to limit advisers never-ending liabilities, rather than support the 15-year long-stop, according to the Association of Professional Financial Advisers’ director general.
Speaking to FTAdviser, Chris Hannant said there was clear support from Apfa members for a straight 15-year liability cap, but recognition the regulator may lean more towards an insurance solution to limit adviser liabilities.
He will raise plans for an insurance solution with the FCA at a meeting next month.
In June, Apfa raised the possibility of a centralised insurance fund as an alternative to the long-stop, should the FCA not agree to a limit on the liability on financial advice.
Apfa put forward a centrally controlled and funded professional indemnity insurance policy, which it claimed 40 per cent of members believed stood a better chance with the regulator of getting the go-ahead than the long-stop.
Mr Hannant said: “Nothing has been said definitively, because the FCA have their clearance processes to go through, but they have emphasised the statutory requirements to protect consumers and how that [a long-stop] squares with potentially limiting consumer protection.
“That is the challenge they have.”
When asked would there be a market among insurers to create insurance to cover advisers for as long as they were liable, he said: “The cost of cases that are over 15-years-old is already factored into current PI premiums because they can occur to any firm at any time.”
Richard Howells, intermediary sales director at Zurich, said: “There are carriers that offer run off cover so we believe an appropriately structured PI scheme is possible.”
Mr Hannant added that some form of insurance solution was a potential alternative that would be raised with the regulator at a meeting in September about the Financial Advice Market Review (FAMR), which was launched earlier this month.
The review will examine the regulatory or other barriers firms may face in giving advice and how to overcome them. This will include the interplay between the regulatory framework for advice and the role of the Financial Ombudsman Service and the Financial Services Compensation Scheme.
Additional reporting by Emma Ann Hughes
