IFA records 'can defend claims'

29/04/2008

Adequate written records may be enough to defend a negligence claim, it has been revealed.

The Financial Ombudsman Service (FOS) reports the case of an independent financial adviser (IFA) accused of not supplying a client with the warning that an endowment mortgage may not generate sufficient earnings to clear the amount borrowed.

Such an objection was raised recently by a couple referred to by the service as "Mr and Mrs E".

The pair complained that they had not been informed by their IFA of any alternative means of repaying a mortgage, other than the endowment policy they selected.

"Mr and Mrs E received a letter telling them the policy was unlikely to repay the target amount when it matured," the FOS explains.

"They said the adviser had never warned them of any risk."

However, the IFA had records that a "key features" document had been given to the couple highlighting the risks involved with the policy they selected.

Consequently, the FOS dismissed the case and did not uphold the complaint.

PYV's Claims Director, Robert Bass, added: "The maintenance and retention of clear records has always been vital in defending complaints. Knowing what happened and proving it are two very different things and being in a position to show the FOS (or any other party) a clear 'audit trail' is more than half the battle. The party with the best kept records usually always wins in the absence of any other factors."

The news follows warnings from the Association of Independent Financial Advisers that retired IFAs should retain run-off professional indemnity (PI) cover.

Such a requirement is necessitated by the claims-made basis of PI, which means policies in place at the time of the event would not cover any claims which arose following their expiration.

PYV are one of the UK's leading providers of professional indemnity insurance. This news article has been produced by Adfero in collaboration with PYV and its unauthorised use is not permitted.

(c) 2008 Adfero Ltd.

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