Covid-19 aside; the first few months of 2021 have been focused on understanding what Brexit actually means for financial advisers.
From problems surrounding equivalence and work visas, to British expats having some of their UK bank accounts closed, the transition to a United Kingdom independent from the European Union has been anything but smooth.
Now, the latest hurdle advisers are facing is professional indemnity insurance (PII).
With passporting rights now a thing of the past, PII is not going to cover any of their EU-based clients; a development that puts both client and planner in limbo.
Jeremy Woodley, chief executive of The Fry Group, told International Adviser: “If no passporting is allowed, then in theory, there shouldn’t be UK-based advisers with European clients – quite simply they aren’t allowed to advise in this situation.
“It also puts pay to cross-border advice. Things are, of course, different for global firms which hold worldwide cover.”
But he believes the latest development may not be such bad news for EU-based customers.
“We expect that the news will probably be better for clients; for example, if locally approved contracts are sold to local residents, it would stop any difficult tax conversations when European clients find they have a non-compliant bond.”
While this may streamline processes, it can become a double-edged sword for advisers when it comes to potential claims they may face.
Woodley added: “It will mean UK adviser firms won’t be covered for that historic advice if the client ever makes a claim unless there’s a move to block notify the current insurers, which would suggest that there’s a concern that something could be wrong with earlier advice and adequate controls aren’t in place.
“In the long term, UK advisers could sell or transfer their European clients to another firm to deliver ongoing advice, but that still won’t mean they transfer responsibility for the advice they gave originally.”
But John Westwood, group managing director at Blacktower Financial Management, said that joining a European network may smooth things out for UK advisers.
“With the unprecedented and disruptive announcement that PII will not cover UK advisers with EU clients, it is disturbingly clear that for many that having the ability to service EU clients removed altogether will be detrimental to their business and will leave countless experienced IFAs vulnerable during an already turbulent time.
“If UK advisers wish to continue to maintain an international client base without waiting for extensive approval processes to finalise, now is the time to make the move to an established and licenced IFA network or brokerage with EU permissions.”