Today I learned that “thousands of IFAs are facing bankruptsy” this is the headline in this mornings trade paper “Professional Adviser”. As IFAs we all have to take out professional indemnity insurance each year and are not permitted to trade without it. Much like car insurance, we have to pay the excess which is typically between £2,500 and £10,000 per complaint. PI cover is expensive. Unfortunately many IFAs appear to have failed to realise that this is per claim and not per “type of claim”. This has come to the fore due to the ongoing saga of Keydata – a firm providing investment products that has since gone bust. I have commented about this before so won’t bore you with further detail. In summary it would appear that many IFAs who advised their clients to use Keydata may now themselves become bankrupt if they receive a spate of claims.
I meet quite a lot of IFAs these days and ok, they tend to be people at the top of the industry, I have not met one that would deliberately rip someone off. There are good and not so good advisers for sure, but the FSA is working hard to get everyone to the same sort of standard and moving advisers away from a sales culture (at last!)… though that is pretty much all PI insurers and the FSA are actually interested in within their forms. So I have to say that I’m not rubbing my hands with glee that others face bankruptsy. This merely is yet another indicator that the industry is poorly structured and the redress system is somewhat ridiculous. No one goes through life without making mistakes…at least no one that I know or have ever met in person.
We have got to get away from this puerile litigious culture and move towards a considerate and more mature approach to how we deal with wrong doing, deliberate or accidental. I fully accept that where someone has lost their entire wealth due to the unscrupulous behaviour of an adviser – such as Mr Maddoff serious redress needs to be provided for. However giving your life’s wealth to one fund manager is painfully suggestive of folly.
There has got to be common sense and reasonableness. Our industry must reimagine itself and not just adopt another set of rules that someone, somewhere will inevitably find loopholes.
We all make mistakes, it is what we learn from them that is actually rather more important so that we don’t get tempted to make them again. So whilst our clients have not been subject to any such problems and I adhere very closely to the simple notion of not advising on anything that I don’t clearly understand, like everyone else I am prone to error… there but for the grace of God go I..
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