PI providers are working on the premise that every piece of work on pensions will lead to a claim making it more difficult for advisers to do the right thing for clients, Phillip Masters has warned.
The London-based managing director of Phillip Masters Financial Advisers cited a case of a 60-year-old client who wanted to repay a loan and was desperate for £6,000. He had £100,000 in a pension so Mr Masters advised he took it from his tax-free allowance.
“As far as my PI provider IFA Solutions was concerned, it was drawdown, so I had to provide a letter to the client asking why he wanted to take money out, and ask if he could take the money from another source. Why take out another loan to pay back a loan then end up paying interest on both?” Mr Masters said.
He added that advisers were often told to produce a ‘reason why’ letter for clients who wanted to withdraw small sums. “There is no logic or common sense in it, but it is a reason for PI providers to put up prices, especially if you are low-risk.”
Mr Masters cited another case, when in August he was approached by an ambulance chaser claiming he had given wrong advice to a client in 1986. He had to explain all this to IFA Solutions.
He said: “I was working at Prudential at that time, and did not have the permissions to advise clients. I only set up as an adviser in 1990. But my PI provider wanted to know what it was all about and why I hadn’t told them earlier.
“I tried to explain that if every IFA told their PI provider every time someone had a moan about something, I would need to have one of their team in the office.”
In its guidance to IFAs, the FCA said: “Advisers should consider the additional record-keeping obligations that may be imposed by your PI insurer. You should maintain documentary evidence to substantiate the content of any dispute.”
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At the time of going to press IFA Solutions had not got back to us with a comment following repeated requests.
