The Association of Professional Financial Advisers has said the longstop issue has not been settled, and has called for a full investigation.
It has expressed concern over the position of retiring advisers, with its recent Cost of Regulation survey showing 85 per cent of advisers said the lack of a longstop creates concerns for their personal finances when planning retirement.
A quarter indicated they were likely to defer their time of retirement in order to pay PI insurance.
Apfa called on the Financial Conduct Authority to reconsider its position on the long-stop and investigate alternative options which it says were not properly considered in the Financial Advice Market Review.
Chris Hannant, Apfa’s director general, said: “Lack of a longstop is a clear concern for financial advisers who operate as sole traders or in partnerships as they potentially face unlimited liability long after they have ceased trading and into retirement.
“The stress that can be caused to advisers who may be long-retired and often of advanced years, with awards which can be made of up to £150,000, cannot be under-estimated.
“Our survey results show that this is a real concern for advisers and an unnecessarily harsh burden to place on individuals and their families. More consideration needs to be given to a fair hearing in such situations.”
He said a 15-year long-stop would be the fairest solution but added that despite that the Famr did not address the issue properly or consider alternatives and he called for a full investigation.
Despite the longstop being a priority, Apfa’s research showed that around half (45 per cent) of advisers were open to the socialisation of costs, by the creation of a compensation fund, as an alternative.
The Famr ruled out a 15-year longstop when it was published in March on the basis that it could limit the protection available to consumers on long-term investment products.
It also concluded that there were relatively few complaints which would be affected by a long-stop
The Financial Ombudsman Service estimated it would affect an average of 216 complaints a year, of which only 30 per cent were upheld.
