The Professional Insurance Broker The official magazine of the Professional Insurance Brokers Association Issue No.6 - Autumn 2004 Learning for Life! Our Commercial Priorities – What You told Us Money laundering – How does it Affect us? Chairman’s Remarks Welcome to the autumn issue of The Professional PIBA is delighted to announce that we are nominating Insurance Broker magazine. It has been an extremely John Hogan, PIBA Committee member, as a busy quarter for PIBA and there have been a number of representative on the new statutory Insurance recent regulatory developments that will impact greatly on Ombudsman Scheme. Diarmuid Kelly, PIBA CEO, and the way Brokers conduct their business. Liam Carberry, PIBA Committee member, have been put forward as candidates for the Industry Consultative Panel. PIBA has welcomed the publication of the Joint These appointments have become available under the Oireachtas Committee on Enterprise and Small Business’s above mentioned Act. Second Interim Report on Reforms to the Irish Insurance By Terry Hardiman market. This report supports PIBA’s efforts to bring back You may have noticed the high number of articles that the term ‘Broker’, which is the term most readily refer to pensions. This was set to coincide with National understood by the general public. We hope that this will Pensions Awareness week, which is running from the be reflected in the new codes of conduct currently being 13th – 19th of September. Brokers need to play an active drawn up by IFSRA. role in promoting pensions to ensure their clients have adequate funding at retirement. As our members must now be aware through our system of constant updates, the President signed the CBFSAI Bill I hope by now everyone has had an opportunity to have No. 2 on the 5th of July. Most of the provisions of this a summer break and as the end of the year quickly Act came into force on the 1st of August. Mortgage approaches I wish you every success for the balance of Brokers now have a stricter compliance regime to adhere 2004. to from the 1st of January next year. Contents Pg. 6 Learning for Life! Pg. 7 Brokers welcome second interim Oireachtas report on Insurance Reform Pg. 10 Tax Planning can Save you a Fortune when Purchasing Property Pg. 12 Approved Retirement Fund Pg. 14 Self Administered Pension Schemes Pg. 15 Our Commercial Priorities – What You told Us Pg. 18 AGM Pg. 20 Meet Hugh Sheriden Pg. 22 Football Crazy! Pg. 23 Professional Indemnity – do Brokers need this cover? Pg. 25 A Mortgage Client, a Client for Life Pg. 27 Money laundering – How does it Affect us? Pg. 30 Designing a website – What you Need to Know Pg. 31 A Pension built on Sound Foundations Pg. 33 Stand – alone PRSA AVCs Editorial The recent inspector’s report into the practices and activities pursued by NIB during the 1990s, together with the ongoing IFSRA investigations into more contemporary practices engaged in by AIB, bring into sharp focus the need for a resolute and independent financial regulator. Some of our fellow travellers within the industry have persisted in the myth that the bigger the institution the more compliant they were in the practices that they engaged in. This was alleged to be supported by the sophisticated (according to them) internal audit and compliance controls that they had in place. The publication of the reports exposes this position as at best misleading and self-centered in its pursuit of maintaining the status quo. The practice of allowing a significant lead-in time in the notification of regulatory inspections to large financial institutions appears at odds with the potential regulatory risk that they pose. This is in direct contrast to the minimal notification generally advised to the smaller regulated firms. It is also inconsistent with the conclusion that can be legitimately drawn from the reports: that is, the previous regulatory system, as operated, simply did not work. Similarly, the self-regulatory environment that operated in certain quarters prior to the Investment Intermediaries Act, 1995, was shown to be totally inadequate in protecting the consumer. The exposure of activities in both MMI and Morrogh merely reinforces the view held by a large number of persons engaged in the business that the more money is involved, the greater is the likelihood of wrongdoing. Opportunities to flout regulations have always been availed of by unscrupulous persons in positions of authority, particularly where a large financial incentive is available. The position as consistently espoused by PIBA has always been that the cost of regulation should be directly proportionate to the risk posed across the industry. PIBA has always put forward the argument that those who present the higher risk should pay pro rata for the cost of that risk. IFSRA has shown itself to be capable of rising above the old historic practices that have dogged the industry in the past. It has also shown itself to be more than capable of both acting as well as talking tough when required. I fully expect that going forward IFSRA will prove to be above the vested interests that currently prevail. The real necessity required to restore consumer confidence in financial services is complete transparency in the regulatory process. The consumer expects that regulation and its enforcers should strike an appropriate balance between the larger institutions on the one hand and the body of retail intermediaries on the other. I wait with interest to see what actions both IFSRA and the Office of the Director of Corporate Enforcement propose to take with regard to the individuals and activities exposed in recent reports. Committee Members Sub-Committee Chairmen Terry Hardiman Chairman Tommy Coyne Vice-Chairman Life/Business Development Liam Carberry John Hogan Secretary General Derek Fitzgerald Gary Ellison Treasurer Mortgage Tommy Coyne Derek Fitzgerald Legislation John Hogan Donal Aitkins Liam Carberry Niall Lynch John Millett Chief Executive: Diarmuid Kelly The Professional Insurance Broker 32 Greenmount Office Park, Harold’s Cross, Dublin 6w ● Tel: 01 4020250 ● Fax: 01 4736920 ● e-mail: [email protected] ● Website: www.piba.ie Chief Executive: Diarmuid Kelly Editorial Group: John Millett, Derek Fitzgerald, Liam Carberry, Lisa Gillett and Tim Ryan Editor: John Millett Publisher: Tim Ryan Communications, 69 Fitzwilliam Square, Dublin 2 Tel: 01 6624649 Design: Design Room Tel: 01 497 9022 Views expressed by contributors or correspondents are not necessarily those of PIBA or the publisher and neither PIBA nor the publisher accept any responsibility for them. The Professional Insurance Broker 5 Learning for Life! By Bryan Johnston, a consultant and trainer in the Financial Services Industry, and ex- director of the LIA. Bryan also designed the PIBA Financial Advisors Assistant course. As an enthusiastic young newly-appointed sales inspector in the consumers becoming better and better educated, we need to early 1980s, I spotted a new Brokerage on the Rathfarnham Road make sure our knowledge and skills are up to scratch. It certainly one afternoon. Keen to boost my panel, I decided to drop in and looks like the QFA qualification will play a key role for all involved introduce myself and my company. in financial services. I was well received and delighted to see that there were three It may well also be the case that if you have a given number of Brokers available to see me. years experience, you will not be expected to fulfil whatever the final mandatory educational requirements are for all new entrants. The meeting started off well until I started to wax lyrical about our fantastic new life and savings plan. I was quizzed about various However, there are huge benefits for you to consider taking the technical aspects of the product and it very quickly became clear QFA course. I have helped many sit and pass these exams, that I lacked a lot of basic knowledge. I was asked to leave and including members of PIBA. If you are keen to take this course come back when I had a proper understanding of what I was but worried for any reason, please contact me and I will be selling. I left with my tail between my legs and my ego delighted to chat through your concerns. considerably bruised. It was a very painful experience! Some of the main benefits of the QFA course Consultation Papers include: IFSRA are busy on the education and competency front. They ➤ It’s practical - all four books relate to day-to-day business. Every currently have two consultation papers on education. The first Broker that has studied the course has found that it has helped paper is on mandatory competency requirements for people develop his/her business and confidence. Many also use the working in financial services. They are examining what books as an invaluable reference source. qualifications people entering and those already in the business ➤ It’s up to date. Courses are updated after the Finance Act each should have. In addition, part of the Insurance Mediation Directive, year and any other changes in legislation or trends are included. which must be enacted by the 15th of January next year, For example, there will be a new chapter on consumer credit addresses the area of knowledge and competence. added this year. You can check out the consultation paper on the web at ➤ It’s accessible. From October this year, five tutorials per book www.ifsra.ie and the responses from various interested bodies, will be included. Tutorials will be held in Dublin, Cork, Galway, including the joint submission made by LIA Ireland, the Institute of Waterford and Letterkenny in the evenings and on Saturdays. Bankers of Ireland and the Insurance Institute of Ireland.