MPs kick-start debate over advice liabilities

MPs are pushing for a debate on limiting the liabilities of advisers in order to increase the availability of advice for people with limited savings.

During a Work and Pensions select committee hearing last week, MP Craig Mackinlay suggested a £50,000 floor for full liability for advisers, and pressed both Treasury minister Harriet Baldwin and witnesses from the FCA to provide an incentive to support those with smaller pots.

While Baldwin responded that this would be considered by the Financial Advice Market Review, FCA director of policy, risk and research Chris Woolard said a regulatory safe harbour would be “a step too far”.

He said: “One of the issues we will need to think about within the FAMR review is whether there is something that is clearer and simpler both for consumers and advisers.

“But there’s a further jump there to somehow create a safe harbour where you can give someone advice and charge for that and not take some responsibility for the advice you’ve given, and that feels like a step too far.”

The regulator has committed to publishing a paper on a potential long-stop by the end of 2015.

Apfa director general Chris Hannant says any reform must balance improvements for a number of people, and potential losses for consumers unable to receive full compensation.

He says: “This is one of a number of routes that could help limit liability and therefore make it easier to offer a wider range of advice to consumers.”

But Pilot Financial Planning director Ian Thomas describes a £50,000 floor as “arbitrary”.

Retirement Advantage pensions technical director Andrew Tully adds: “We have long talked about simplified advice and whether we could have some kind of light touch offering for small pots. This could be part of how that might work, but it isn’t a catch-all solution.”