The debate about limiting adviser liability is not over, despite the regulator's attempt at closing a lid on it following the Financial Advice Market Review (FAMR), Keith Richards has said.
The chief executive of adviser professional body the Personal Finance Society (PFS) warned the regulator had got its argument around consumer protection wrong and would achieve the opposite of greater protection by preserving the current rules.
The PFS is ready to put up a fight for an adviser long-stop and has already shared its views with the decision makers, he said.
FAMR had looked at ways of capping adviser liability, including instating a 15-year limit within which claims against advice firms must be brought, but concluded there was no case for changing the rules.
It had found the ombudsman was dealing with comparatively few complaints relating to advice longer than 15 years ago, with most such complaints concerning endowment products, which would naturally be phased out over the coming years.
Hence, putting in place a long-stop would "inappropriately limit protection for consumers on long-term products," FAMR concluded.
Financial Conduct Authority (FCA) head of banking, lending and distribution Ed Smith told advisers at the Thesis Asset Management conference on 21 April introducing a limit would send out a bad message and turn more people away from buying long-term products.
But Richards (pictured) said evidence points to a different argument. Consumer protection would be better achieved by having a more buoyant advice market, capable of serving more people, and pushing fewer into the hands of unregulated firms and scam artists.
Having no long-stop in place means there are fewer regulated firms serving consumers, and more people operating in the unregulated space, which offers no consumer protection at all, he said.
"The evidence is there, we have fewer consumers finding the need to complain about advice past 15 years. But by not giving certainty to firms on regulated investment fewer are willing to operate in the regulated space.
"We think the reason to deny a long-stop was a flawed consumer interest argument. We see an opportunity to revisit that on the basis of achieving better consumer outcomes."
'Massive endorsement'
Richards said the PFS was heavily involved in talks with the regulator and government about the shape of the future advice market. He said he sees FAMR as an opportunity for significant change in the advice sector after years of suffering reputational damage.
The fact the government and FCA were turning to advisers for help with consumer decision making as part of the Care Bill and post pension-freedoms, was a "massive endorsement" of how far the market had come after the Retail Distribution Review (RDR), he said.
"The profession continues to gain positive recognition post-RDR. The government realises people need access to the kind of service you offer," he said.
"The regulator and the government have made an error by not re-introducing the limitation of liability. We are quite prepared to challenge those issues."
