The FCA's July discussion paper invites us to share our opinion on the ‘duty of care’ we owe our clients. Its asks for interested parties to consider:
Do you believe there is a gap in the FCA’s existing regulatory framework that could be addressed by introducing a New Duty, whether through a duty of care or other change(s)?
Whilst I believe the consultation paper is an essential read, it covers an important issue that affects each of us.
1. Can a wealth manager or financial adviser properly advise their client on their retirement plans if they are unaware of their clients liabilities in relation to personal guarantees?
2. When a client seeks legal advice before signing a personal guarantee or whens a solicitor handles the purchase of a commercial property (where the the lender requires their client to sign a personal guarantee), is there a duty of care to mention that some of the guarantors personal guarantee risk might be insurable?
3. Does a finance broker, when recommending their client obtains independent legal advice before signing a personal guarantee, owe a duty of care to the guarantor to mention that some of the personal guarantee risk might be insurable?
4. When being asked to prepare a client's accounts in support of a business finance application, does an accountant owe a duty of care to make their client aware of personal guarantee insurance if it clear that their client is likely to be asked to sign a personal guarantee?
Personal guarantee insurance is a relatively new product and it had only recently been given proper credibility by the backing of a major insurer.
Many professionals are unaware of the existence of personal guarantee insurance and how it may or may not form an part of the ‘duty of care’ they owe their clients.
I would welcome any feedback:
- Do you ask clients about their personal guarantee liability (have they signed any, or might they) as part of your client 'discovery' process?
- Do you believe that advising your client about the existence of personal guarantee insurance should form part of your duty of care towards your client?
- Were you aware that it may be possible for your client to insure some of their risk?
At Purbeck we believe in personal guarantees. They are an essential element of the financial landscape helping SMEs secure funding that would otherwise be inaccessible.
What Purbeck do is offer insurance to the guarantor, usually a company director, against the personal guarantee being called in by a lender (as a result of business insolvency).
You can read the FCA discussion paper by following this link: