The long-stop would limit the amount of time clients can complain about financial advice, meaning advisers can be held liable for giving unsuitable advice to clients many years prior to the claim being made.
Yesterday, the UK regulator announced the long-stop rule will be examined as part of the Financial Advice Market Review (FAMR).
Reducing the burden
The document said the UK Government and the regulator would consider alternative approaches to protect consumers and also “remove or reduce the burden of indefinite liability on individual firms”.
It said it would consider the following options:
- Maintaining the current regime
- Introducing a single long-stop (possibly of 15 years)
- Introducing varied limitation periods linked to the terms of products
- Strengthening professional indemnity insurance (PII)
- Setting up a compensation fund for claims older than 15 years
The long-stop would serve to calm advisers’ concerns about the high risks they face as a result of their ongoing liability. The FAMR paper pointed out that advisers might be discouraged from providing advice about long-term products because of this liability risk.
Lacking in certainty
“Whilst we are very proud of our advice and have a negligible complaint rate I would personally like to see an introduction of a long-stop just to provide a degree of certainty which can be lacking,” said Lee Robertson, chief executive of Investment Quorum, adding that consumers would also benefit from more certainty.
He also said he is unconvinced the public would view a 15-year long-stop as unreasonable, even when viewed alongside the long-term nature of financial products.
However, Robertson argued that the UK Government is unlikely to grant the industry a long-stop because it is keen to ensure the public have the confidence to address their financial savings and investments.
“This may just be the last time we get this type of debate so I think it is important that it is a serious debate and not just a nod towards it.”
Keith Churchouse, director of Chapters Financial, also agreed that a long-stop would be a positive move: “From our clients point of view a long-stop could encourage them to engage with their financial planner to ensure their objectives and needs are met in the future, and that is a good thing.