IFAs need to consider 'run-off' implications before exiting industry - Professional Indemnity (PI) insurance

03/02/2010

Written by Neil Pointon

More than one in ten independent financial advisers (IFAs) are looking to exit the industry, new figures reveal.

Ahead of the retail distribution review (RDR) coming into force, JP Morgan Asset Management notes 14 per cent of IFAs are planning on withdrawing from the sector altogether, while two per cent will become tied.

Jasper Berens, head of retail distribution, tells MoneyMarketing that advisers planning on leaving the industry should consider how they will do this as soon as possible.

"It's a tough market in which to sell your business at present but advisers shouldn't be fooled into thinking that valuations will go up in the next few years," he states.

Neil Pointon, CEO of specialist PI broker PYV, points out the need for exiting IFAs to consider how they are going to protect themselves and their clients from future discoveries of negligence and associated financial loss.

"As Professional Indemnity insurance policies are written on a 'claims made' basis, it may not be enough just to hold live policies whilst you trade," he advises.

"Once you cease to trade, unless you are able to pass on your past liability to someone else, you should consider maintaining 'run-off' PI whilst you continue to be exposed. This is particularly the case for sole traders and partnerships."

The remaining 84 per cent are looking to stay in the industry and remain independent despite the RDR, which has previously been revealed will not include a long-stop on Professional Indemnity insurance claims.

Meanwhile, Julian Stevens of Harvest IFM, noted in a Money Marketing article that making changes ahead of the RDR will cause "a wholesale shift in business models and consumer preferences".

© 2010 Adfero Ltd.

If no story is shown above, please visit our archive section, acessible via the archived stories and press coverage link at the foot of the PYV home page.

Click here to go back to archive list