What the Mansion House Speech Could Mean for Financial Advisers and PI Insurance

Hear from John Netting – COO at BareRock

Chancellor Rachel Reeves’ recent Mansion House speech outlined significant proposed changes to financial regulation, focusing on growth and regulatory reform. As your specialist Professional Indemnity Insurance provider, we want to share what these early-stage proposals could mean for financial advice firms.

Financial Ombudsman Service Reforms

The Chancellor announced comprehensive reforms designed to return the FOS to its original role as an impartial dispute resolution service. The most significant changes include:

Fair and Reasonable Test Changes:

Where firms have complied with FCA rules, the FOS would be required to determine that the firm has acted fairly and reasonably. This should provide much greater certainty for financial services firms.

10-Year Absolute Limit:

A welcome proposal introducing an absolute 10-year limit from the conduct complained of to bring complaints to the FOS, addressing long-standing criticism about the lack of a proper ‘longstop’.

Interest Rate Reduction:

FOS award interest rates would change from 8% to Bank of England Base rate +1%, making awards less punitive for firms.

Our View

These reforms represent a significant step forward for the industry. The 10-year absolute limit aligns with our longstanding position that open-ended FOS complaints create unnecessary uncertainty for both PI insurers and policyholders.

Currently, the lack of a longstop period means files might need retention for 23+ years – a client receiving pension transfer advice at 45 might not realise issues until retirement at 65, then have three years to complain. The proposed absolute limit would provide much-needed certainty for file retention policies and risk assessment.

Broader FCA Changes

The Government’s “Leeds Reforms” include several FCA operational changes:

• Mass Redress Framework: Revised framework allowing the FCA to pause complaint handling during mass redress events
• Faster Authorisations: Statutory deadlines for authorisation applications shortened by approximately one-third
• Senior Managers Regime: Proposed 50% reduction in compliance burdens and trimmed approval timelines
• Consumer Duty Review: Examination of whether the Duty “unduly affects wholesale activity”

From a PII perspective, the mass redress changes are particularly significant. While potentially preventing unnecessary complaint costs, delays in paying redress could result in further market-related losses.

How We Support You

These proposed changes represent both opportunities and challenges. As reforms develop through consultation, we’ll continue monitoring developments and provide updates to help advice firms stay ahead of the curve.

Key Takeaways

These proposals could represent wide-ranging reforms with a clear philosophy of rolling back regulation to foster growth. The FOS reforms, particularly the 10-year limit, would provide crucial certainty for complaint limitation periods if implemented.

Firms should monitor developments whilst maintaining focus on current regulatory requirements, client outcomes, and robust risk management. We’re at an early stage – these reforms will undergo public consultation before potential legislative implementation.