FCA confirms its position
Last week saw the release of the Financial Conduct Authority’s (FCA’s) board minutes from their meeting on 28 February 2019. These minutes make interesting reading and indicate that the FCA board seemed to be amenable to the idea that backing the increase in the Financial Ombudsman compensation limit from £150,000 to £350,000, with effect from 1 April 2019, could lead to a smaller number of advisers operating in the defined benefit transfer market.
The minutes stated: “The board was informed that in reaching this decision, the executive had considered the trade-off between the substantial benefits of a £350,000 limit for complainants and the potential for an adverse impact on the ability of personal investment firms (PIFs) to obtain professional indemnity (PI) insurance in future.
It was recognised that PIFs advising on defined benefit to defined contribution pension transfers were particularly likely to be affected, as this was an area of concern to PI insurers.
The board discussed the proposal. While noting the risks and uncertainties around the effect on the supply of advice, it accepted the executive’s view that it could result in a more focused market with a smaller professional group providing affordable advice.”
In the words of Sandringham’s CEO, Tim Sargisson: “The fact it comes from the minutes of their own board and not some idle piece of speculation provides all the evidence you need.”
Access to advice and affordability is one side of the argument, the other is the statutory obligation of the regulator to provide consumer protection. Which do you think the FCA consider to be the higher priority?
The FCA is preparing the ground for what may lie ahead, which is likely to be higher compensation claims following DB transfers, but the good news is that the increased limits only affect acts or omissions that happen after 1 April 2019.
If you are concerned about future PI costs, and want to see how Sandringham can help you to build a proficient, profitable and future-proofed business, why not contact us or join us at one of our experience days?
