Advisers have been left "vulnerable" during an already turbulent time, thanks to insurance failing to cover advice to Europe-based clients.
According to John Westwood, group managing director at Blacktower Financial Management, the disruption that Brexit will bring to advisers whose clients live in the Eurozone has been compounded by the news that professional indemnity cover will not cover services passported to them.
He called the news "unprecedented and disruptive", and said: "It is disturbingly clear that for many, having the ability to service EU clients removed altogether will be detrimental to their business and will leave countless experienced IFAs vulnerable during an already turbulent time."
He warned that, if UK advisers wish to continue to maintain an international client base, without waiting for extensive approval processes to finalise, "now is the time to make the move to an established and licensed IFA network or brokerage with EU permissions".
Westwood's comments came in light of revelations made by FTAdviser on March 5 that the end of passporting between the UK and the EU post-Brexit means advisers wishing to service clients based in the EU cannot rely on their PII to cover them.
Having the ability to service EU clients removed altogether will be detrimental to their business.John WestwoodJason Porter, a partner at Blevins Franks, told FTAdviser this could pose potential problems for the 5,500 UK-authorised firms who, in 2016, were passporting their authorisations into Europe.
He cited cases of jurisdictional authorities in countries, such as France, "already starting to flex their regulatory muscle" and writing to UK financial institutions asking them about their intentions when it came to servicing clients based in the EU.
Porter explained: "This puts UK firms in a difficult position in terms of PII. While the FCA requires that all UK regulated firms maintain PII, the demise of passporting means they are no longer authorised to provide advice in the EU.
"If they have not taken one of the various routes to obtain authorisation in the EU member state where any clients are located, this is likely to result in a denial of PII coverage in respect of those clients."
PII premium hikes and a tightening of what it will cover has already caused difficulty for some UK financial advisers, particularly with respect to advice on defined benefit transfers.
The Personal Finance Society has long called for a better regulatory environment to help create a more competitive market for advisers' PI cover.
Keith Richards, chief executive of the PFS, said: "The PFS continues to work with its members and engage with HM Treasury and the regulator in order to bring forward a solution to the issues within the PII market."
Have your say
Have you already experienced any problems with serving any clients you have based in the EU? Let us know by emailing: simoney.kyriakou@ft.com
