IFA: Pru must pay for ScotAm advice

make it pay..

Charge your client a fair rate and if they don't think its fair have them complain directly to the Pru, after all they make the mistake they must carry the can. Don't lose sleep over it, if its not profitable work for you then walk away...

Posted by: Fraser Brydon

Theft

In teh article, Pru are quoted as saying they are not obliged to make a correction payment. Correct me if I am wrong, if they don't it would be theft? Becuase it is a mistake and depending upon the clients decision, they may be penalised (they mention an unauthorised payment option!), then there is a moral onligation to correct and for the client to receive advice paid for by Pru. If I were them, I would set a ceiling on that advice in advice and communicate it (say a max of 1/2 hr at the average IFAs hourly rate), that will be significantly lower than every client who approaches an IFA complaining that they have had to obtain advice to rectify PRU's error as if it they reject the clients complaint and they go to FOS, the FOS fee would exceed what the cost of advice would have been if 1/2s advice was budgeted for. When will these insurance companies actually start to practice TCF?

Posted by: Phil Castle

Claiming fees from Providers

It is not possible to claim fees from a provider as there is no duty of care by the provider to the adviser. The fees must be paid by the client and the client must claim them from the provider.(Procrown Investments Ltd t/a King IFA vs Scottish Widows - Portsmouth County Court 2002 refers) However, there are FSA rules determining compensation payable by providers to advisers if justified. Pru are satisfying their duty of care to the clients and it is unlikely that compensation to advisers is justified.

Posted by: Barry Painter

Interesting re the lega case

Can you email me a link to it? phil.castle@fescape.co.uk My point however is that if the client thinks they need advice and that Pru shoudl have to pay for it and they submit a complaint to the FOS, it will cost them the FOS fee, UNLESS the FOS dismiss it out of hand or deem it vexatious which would be very interesting bearing in mind how few (if any) they ahve ever dismissed as vexatious or fraudulent despite the IFA providing evidence of the vexatious nature or fraud and still charging the IFA the fee.... The fairest thing is for the Pru to state a fee element they will pay direct to the adviser if the client signs to say advice has been taken. If the adviser feels they need more, they can charge the client for teh extra directly, not advise, or accept the amount even if they don't think it enough. The FSA (up until recently) said it was a principles based regulator (although it has since changed it's tune AGAIN) and this is a principle issue, rules do not need to come in to it.

Posted by: Phil Castle

Advice necessary?

If this was similar correction payment coming from something you had been overcharged for eg your electricity bill, (which has happened recently BTW), then would you go get additional financial advice? I don't think so, it just gets banked and goes into the wider scheme of things. Just because the correction payment is from a financial services product why does that make it different. Using the threat of a FOS fee is a wholy unfair route to extract compensation from anybody, I've been on the receiving end of that tactic, but since the law has been mentioned financially gaining from an unwarranted threat could be considered as the common law offence of blackmail (Theft Act 1968 Section 21).

Posted by: Andy Newman

Andy Newman

The compensation as I understand it is simply what should of been paid, it does not cover the potential cost of it being paid in a way that could loose the client significantly MORE than the compensation and that is why as Yvonne has said, advice may be needed. The Pru are sidestepping this issue when all they needed to do was allocate an amount to cover the cost of advice. I have seen it done before with endowment complaints where at least one insurer who had got it wrong, but had ditched it's adviser salesforce told clients they should seek advice and the insurer would on confirmation of teh advisers details make payment of £x towards the cost of that advice. It is up to the client then whetehr to seek that advice and the adviser whether to accept the payment as enough. If a Pru client approaches me, I will explain the cost of my advice (i.e. the tiem cost and risk of me advising them to do something that subsequently turns out to have implications I missed) and suggest they ask Pru eitehr to advise them which to do, or if they will not (because they have no one authorise to advise),ask themt o meet the cost of this as it is needed to rectify THERE error, not that of the client. Pointing out to them the cost of arguing it through the FOS is NOT obtaining money under false pretences, it is suggesting to them the option of be pragmatic. Were there a nominal fee for FOS cases I would still suggest the client did that as I think they would have a legitimate claim that they have incurred advice costs as a result of the Pru's error (not becuase of some change in legislation, which teh Pru could not be responsible for), but I might suggest to them were the fee similar to the advice cost that they might want to be pragmatic on the issue and not pay a nominal fee to the FOS (were there one) as the time and effort woudl outweigh the benefit. This is why I said if the Pru had any sense, bearing in mind how the FOS scheme stands at present they should say they will pay ALL affected advice fees to a set amount as that way anyone who tried for more woudl probably have any case taken to the FOS kicked in to touch before it went anyway as being fraudulent and vexatious. So Andy, I understand where you are coming from and I agree in part, but in thsi case, Pru are making a rod for their own back by not thinking about TCF from the start.

Posted by: Phil Castle

Propose Standard Compensation Advice Fees

The member of the public should be no better or worse off as a result of an error. So if a policyholder needs extra help and there is additional cost then that too should be paid. I don't think it's something that has been considered under TCF and maybe it should. Perhaps as an industry via the ABI we should add in a standard, or series of standard advice fees to cover compensation cases. If we did I suspect most would be spent with little finding it's way back to advisers. If the customer does something daft with the compensation then I wonder, could they go back to the provider because they had not included cost provision for the advice they needed. Thanks for positioning it Phil as I had started to rant about the FOS which is a different debate

Posted by: Andy Newman