It will also give IFAs valuable information about how to improve their systems and present their risk more effectively to insurers.
David Kenmir, Director of Investment Firms at the FSA, said:
"We want to help IFAs present their businesses in the best possible light. Experience picked up from our discussions with firms and with the professional indemnity market has shown that a good quality presentation to an insurer could make all the difference. We hope this booklet will help firms to provide comprehensive and relevant information to their Insurers".
As would be expected, issues that have attracted a high level of media interest such as split capital investment trusts, mortgage endowments and SCARPS (e.g. precipice bonds) are those that tend to give rise to varying levels of concern for underwriters.
Insurers may still give quotes to firms who have written this type of business in the past because they consider other factors when they assess the risk a firm poses. Firms can help themselves by seeking guidance from insurers on which areas are of particular concern and consider how they can alleviate some of these concerns.
Factors that may be taken into account include:
* advisers / support staff ratio;
* self-employed staff;
* compliance;
* control systems / monitoring;
* research;
* client / advisers ratio;
* trail (volume of past business);
* qualifications and experience;
* specialist support; business structure ;
* regulatory visits / disciplinary record; and
* claims records / complaints log.
It may also be useful for firms to supplement any proposal form with other relevant information on 'risk management' issues such as:
* compliance systems e.g. frequency of file checking;
* management control e.g. show the degree of supervision of advisers;
* training and competence e.g. evidence of assessments of competence and qualifications; and
* client acquisition e.g. carrying out client satisfaction surveys.
The guide can be found here.
Also published today is the FSA's policy statement 'Professional Indemnity Insurance for personal investment firms: feedback on CP193 and made text' which relates to Consultation Paper 193.
