When Mills & Reeve ran a seminar in May of this year asking this very question, the feeling among many of the claims adjusters and underwriters in the audience was certainly pessimistic. 

This, perhaps, is not surprising. Given that the recent recession had its roots in a financial collapse, financial advisors and their insurers have borne the brunt of the wave of claims arising out of investment products recommended during the boom years. 

In October 2013 and again 12 months later, members of our financial claims team presented seminars and workshops to over 250 financial advisors from a wide range of different firms and networks about risk management. What was striking at the workshops in October 2014 was that advisers appear to be learning from the painful lessons of the recession and as a consequence of the Retail Distribution Review (RDR). There was a marked increase in their understanding of and engagement in risk management. This, in our view, can only lead to them becoming a better risk. 

So, what are the key lessons being learnt, that are just as important for insurers when dealing with claims?

Key lessons

The file: One of the biggest issues last year was the transferring of files between firms. IFAs are very mobile. They frequently move firms and the nature of their business often means taking their clients with them. However, our suggestion that advisers should ask for the previous firm’s file was routinely met with suspicion. 

The reasons for doing so may seem obvious but it is also something to bear in mind when insurers are dealing with a circumstance or early notification that involves advice also given by a former firm. 

The claim may not materialise for several years. But advisers should be taking steps to ensure they obtain a copy of the file from the previous firm. If not, it can be very difficult to identify what advice was given and when. Having that file is often crucial to assessing liability and apportionment between firms. But without it, decisions will often be made in a vacuum. 

Who knows what may happen to that file or the previous firm in the interim. This is particularly important in a world of electronic documents – more than 90 per cent of business documents are now being created and stored electronically, often with no paper copies. 

What if the previous firm has a system of deleting files after a certain period of time? What if the previous firm goes into liquidation and the files are lost? 

Advisers were more receptive in 2014 to the idea of bringing their file with them when moving firms and when the client follows them. However, it is still important for insurers to make sure that the insured is preserving its electronic files. Failure to do so could lead to inferences being drawn if the file is deleted or destroyed after the claim is notified, or paying for the file to be retrieved if possible, which will not be cheap. 

The IFA: Another lively discussion point, and something that will be of particular interest to underwriters, is what risk management steps are being taken when a new IFA joins the insured firm. 

Last year, the picture appeared to be that other than the large networks, firms carried out scant due diligence. The picture was markedly different this year with many advisers insisting that they are routinely carrying out file reviews and audits, particularly where the new adviser is bringing clients across with them. 

We suggest this is a core question in any proposal form. 

Suitability letters and attendance notes: Another issue is the level of information that goes into the suitability letter. 

Last year we found that there was a disparate range of information being included, particularly about the client’s capacity for loss. Some advisers were including very little information, while at the other end of the spectrum actual figures of loss were being included. In contrast, this year it appeared to us that basic risk management steps are now the norm not the exception. So, it seems that advisers are beginning to understand that a richly detailed suitability letter and attendance notes of discussions are as important as the advice they give. Last year, we noticed how attendees would ask us what exactly they should record from a telephone conversation in the file. Twelve months on, on the whole, this is no longer alien to them.


In summary, what did we learn from our snapshot of the market this year? Well, this was a relatively small cross-section of the market, but on the whole attitudes towards risk management were much more positive. If this is reflected in the wider market, then the answer to the question posed in the title should be a more confident “YES”.