A Newport-based adviser has criticised professional indemnity insurers for treating South Wales-based advice firms less favourably than others.
Ray Adams said his firm, which had conducted a number of pension transfers for former members of the British Steel Pension Scheme, but had been given the green light by the regulator, had difficulty finding a PI insurer willing to offer cover.
In a process that he described as unpleasant, Niche IFA was able to secure cover four months ago at “eye-watering” conditions, he said.
Mr Adams said: “Two years ago, our premium was 1.6 per cent of turnover; last year it increased to 2.5 per cent and it is now at 5 per cent. We have a six-figure premium.
“If you’re an adviser in South Wales, you are a bad guy in PI [insurers'] eyes.”
Niche IFA closed its doors to new clients in October 2017, after receiving around 10 calls a day from steelworkers looking to transfer out of their defined benefit scheme. But it has since reopened.
Mr Adams said the firm had turned away 358 inquiries from members, as the process of accessing DB transfers took on average 25 hours of work, and his team of advisers was at capacity.
He declined to reveal, however, how many pension transfers his firm advised on.
Niche IFA received a supervisory visit from the Financial Conduct Authority months later, which gave the firm a clean bill of health, he noted.
FTAdviser contacted several PI insurers for comment but has received no response.
FTAdviser has previously reported that financial advisers involved in the British Steel pension transfer scandal have been struggling with PI cover, after some insurers introduced a blanket exclusion on new policies referring to steelworker transfers.
The issue started to affect the whole DB advice market after the Financial Ombudsman Service award limit was increased from £150,000 to £350,000 by the FCA in April, accompanied by a forecast that the rise could push up premiums by 500 per cent in a "worst-case" scenario.
Since then some advisers have seen their PI premiums increase exponentially, with the Personal Finance Society confirming recently that one adviser had reported the cost of his insurance had risen from £6,700 to £27,000.
Mr Adams said: “PI [insurers] won’t identify the good and the bad advisers, but they are reducing the market. I predict we will end up with less than 100 specialist firms working in this space.”
Members of the BSPS were asked to decide what to do with their pensions as part of a restructuring process in 2017.
As a result about 8,000 members transferred out of the old scheme by October last year, with transfers collectively worth about £2.8bn.
But concerns about the suitability of the transfers were soon raised leading to an intervention from the FCA, which resulted in 10 firms - the key players in the debacle - stopping their transfer advice service.