Opinion  

Farewell long-stop

Financial Adviser

So the industry’s demands for the implementation of a 15-year long-stop have been dragged out to an all-too painful, and inevitable, conclusion.

This week the Financial Advice Market Review’s final report said that - after careful consideration - it would not be recommending the introduction of a 15-year long-stop.

In the end the decision was based on what was best for the consumer. Introducing a long-stop would limit the protection available to consumers, the Financial Conduct Authority and HM Treasury concluded.

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But of course what is good for the consumer is not so good for the adviser.

In 2014, one adviser told Financial Adviser that the lack of long-stop meant advisers had “fewer rights than al-Qaeda”.

That may be questionable, but what is not in any doubt is the difficulty advisers do and will experience with the cost and availability of professional indemnity cover in a environment where unlimited liability exists.

But most financial products are sold on a long-term basis. Very few investment vehicles, including pensions or life and associated medical covers are designed to be cashed in within a few years of purchase.

So the introduction of a long-stop would not reflect the reality of the time span of your recommendations.

The Financial Advice Market Review cites data from the Financial Ombudsman Service which shows there were few complaints relating to advice provided longer than 15 years.

The figure estimated by the Fos is to be an average of 216 complaints per year, of which only 30 per cent were upheld.

But there are other realities; advisers say it is not the consumers who are fuelling many of the complaints, but the claim management companies, who encourage consumers to complain, in many cases with no justification whatsoever.

And then there is the argument that the long-stop would have brought financial services into line with the rest of UK industry, where there is a 15-year limit on claims.

Now might be the time to adopt a pragmatic approach. Yes, there are going to be consumers with legitimate claims dating back more than 15 years, but thanks to the introduction of Retail Distribution Review and Mortgage Market Review requirements, etc, these will become fewer and fewer.

The wheels on the ‘mis-selling’ bandwagon will finally have come off.