Insurance broker, Towergate, has delayed plans to compensate clients who were miss-sold investment schemes and given poor pension transfer advice. Compensation payments were expected to start in the third quarter but will now start in the fourth quarter of 2015 ‘at the earliest’.
Towergate says that it is “not yet possible to make a reliable estimate of the group’s ultimate liability in connection with these investigations”, although it has put aside £85 million to cover the cost.
The company revealed it faced an FCA investigation In May 2014, blaming the investigation on a firm it had previously acquired. Towergate has now sold the business to its management but has retained the miss-selling liability.
“Miss-selling damages trust in the industry and makes professional indemnity insurers wary of the sector,” said James Burgoyne, Director- Claims & Technical, Brunel Professional Risks. “This unfairly affects the vast majority of high quality firms who manage their businesses well and provide excellent advice to their clients.
“Towergate acquired its miss-selling liabilities from a firm it had previously acquired,” he added. Insurers are aware of the risk of inherited liabilities. Possibly the single most important lesson for IFAs to take out of the Towergate case is the importance of effective due diligence if they plan to grow their business by acquisition.”
News stories about the proposed changes have been published by Citywire New Model Adviser and Money Marketing