Investments 

Mattioli Woods blames PI costs on pension transfer exit

Mattioli Woods blames PI costs on pension transfer exit

Mattioli Woods has cited professional indemnity insurance costs as the reason behind its withdrawal from the pension transfer market.

The company’s chief executive, Ian Mattioli, made the revelation in the firm's latest trading update ahead of its full results being released in September.

He said: "Following consideration of the increasing costs of professional indemnity insurance, additional regulatory controls and the resources we would have to dedicate to a relatively small part of our business we have decided to withdraw from this market and look to vary our permissions with the FCA accordingly.

"The impact of this decision on the group's financial performance is not expected to be material, with pension transfer advice to individuals with safeguarded benefits contributing approximately 1.6 per cent of direct revenues for the year, and less to profit given the significant compliance costs associated with this activity."

Financial advisers performing a high volume of defined benefit pension transfers are having their level of professional indemnity insurance coverage reduced to £500,000, as insurers are wary of the risks involved in this type of business.

One advice firm with clients in the British Steel Pension Scheme has also seen its PI insurance premiums increase tenfold and its excess for defined benefit transfers go up to £100,000.

Mattioli Woods saw its total client assets grow to more than £8.7bn at the end of May 2018, with £2.3bn in discretionary mandates.

The company also said it had seen "strong" organic revenue growth of more than 15 per cent.

Mr Mattioli added: "Acquisitions remain a core part of our growth strategy.  We continue to review a diverse pipeline of potential acquisition opportunities and believe further consolidation within our core markets remains likely.

"Our strong balance sheet gives us the flexibility to make further value-enhancing acquisitions."

He added that said the Financial Conduct Authority’s Retirement Outcomes Review may lead to a cap on charges, and he said that would suit Mattioli Woods.

Mr Mattioli said: "Last week the Financial Conduct Authority published proposals in response to the findings of its Retirement Outcomes Review , which are designed to help people think about their drawdown choices earlier, create investment pathways to help them with their choices and make costs and charges easier to understand, including the possible introduction of a charge cap.

"Against the backdrop of an evolving market I believe our advice-led model, integrating administration and investment management, is aligned with the regulator's proposals and makes us very well-positioned to reduce client costs and deliver improved client outcomes, while securing further profitable growth for shareholders."

david.thorpe@ft.com

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