FAQs on Woodford - PII notification
"We will not make any payment under this policy unless you give us prompt notice of anything
which is likely to give rise to a claim under this policy in accordance with the terms …"
Most PII has something like the above wording. It would be most unwise to initiate contact with your clients on the subject of Woodford without contacting PII first. If you have anything that you would like to say, please forward to us for prior approval – or to your broker.
We are still working on some standard statements for you to send – but ideally without invalidating PII or inviting a claim...so it's not easy to design.
Q: How can you help a client, which is what you are paid to do, when if you help them claim against Link you may be inviting a claim against yourself.
If you help a client with a claim, then you risk implicating yourself, because the claim will finally fall on you – because you sold it. This happens again and again, and you must be aware of this when trading as an IFA. It doesn’t mean you don’t do anything, and you absolutely cannot stop communicating with your clients, but you need to tread very carefully, and there is no silver bullet solution.
When you send your proposed replies to client on to PII they should approve them…... but It isn’t easy for anyone. IFAC’s advice is “don’t make it easy for PII to reject your claim.” Ie just keep communicating with them, as well as with the client as best you can.
Q: What is everyone else doing?
IFAC believe that the stance taken by large nationals and networks is that - all cases notified as potential circumstance. Since SJP and HL sold 30% and 40% respectively, we can expect to hear more from them, in public trading notices. “Potential circumstance” is a very long way from a claim and PII probably don’t know what to do either….but you still need to keep them in the loop.
Q: Does notification affect my PII renewal?
Notifying a claim will not affect your PII renewal, because it is the fact of Woodford that affects the renewal, not a question marked “have you notified?” But it is imperative advisers get acknowledgement from a broker of a 'notification' as it means you will be covered at renewal irrespective if the renewal terms exclude it as it will be covered in their current policy.
Q: How should I notify?
Q: Have you been in contact with any PII providers with their views on this situation?
IFAC await an update from their broker on this. We asked them what we should be saying to clients; and we got an update this morning to say they are still working on it. We all await the FCA judgement on what to do as well. IFAC believe that PII companies would like to see anything before it is sent out for approval.
Q: On what basis you believe the advice we have given to our clients is incorrect?
When it comes to this sort of problem, no one cares whether it is right or wrong they just want compensation.
Most IFAs have lived through Arch Cru. They have seen that portfolios of funds recommended and set by established risk and research firms, such as DT and Defaqto and others as being suitable for medium risk etc. didn't prevent a claim against one rogue fund among many good ones bringing the overall performance down a small fraction.
IFAs were forced to pay compensation, regardless of what they put into their SR reports/ what the client signed, or asked for and regardless of what was told to the client beforehand and even regardless of whether or not the client was unhappy and wanted to complain. Some clients sent the compensation cheques back to their IFAs! This could play out with Woodford. Even good advice ends up in compensation claims, such is our industry.
The PPI misselling scandal is also worth examining: that product was never even regulated (pre G-day).
Q: Was I at fault for using Woodford?
It doesn't matter what happened, IFAs always get the blame. Pension transfer 88-94/endowments/splits/structured products/NMPI funds/Arch Cru/Sipp switching/ AIG premier access bond / Property fund liquidity/Brandeaux every single time the IFA took full liability. That's why you get paid so well.
As a general rule, clients get paid out when things go wrong if they use an IFA, but if they go direct / ex only, then they are on their own. That's why you charge up to 1% per annum to look after their money.
It is not personal it's financial services.