IFAs too tough as chasers switch to banks and payment protection insurance
MONEY MARKETING - 8TH MARCH 2007
Leading claim management companies are now turning down claims against IFAs as they believe they are unprofitable and are instead focusing on payment protection insurance and bank charges.
Brunel Franklin director Ian Allison says the firm has decided it is not commercially viable to go after sales made through IFAs due to the time and expense of chasing a claim and has abandoned taking on Serps' claims. He says it makes sense to go after endowment providers which put big sums aside to deal with claims whereas it can be more difficult to achieve payouts from advisers.
There have been concerns that Serps' contracting-out mis-selling could cost IFAs and insurers up to £2.8bn.
But Allison says it is too difficult to contest these claims because firms hide behind the Limitations Act and compensation is paid out as an extra monthly pension contribution, making it hard for a CMC to make a profit.
Last week, the company won its first big payment protection insurance payout, amounting to £12,000, and says payment protection insurance compensation could total over four times the £3bn paid out for endowments.
Allison says: "We need a business model that provides acceptable revenue and going after IFAs does not pay. We have never been in the game to put small firms out of business."
British Compensation managing director Simon Burgess says: "CMCs have better, more profitable fish to fry than IFAs."
