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Start-up PII · Financial advisers

PI insurance for start-up IFAs — FCA-authorised firm requirements

Reviewed by Matthew Bartlett, Director, Apex Insurance Brokers Limited · Published 14 July 2026

A new IFA firm needs FCA authorisation, PII in place from day one, and a market that will look at start-up business. This page covers what the FCA expects, the DB-transfer restriction (a major placement filter), and how a specialist broker approaches the first-year placement.

The FCA requirement

FCA-authorised firms giving investment advice must hold PII to meet the FCA Handbook standards. For most retail-investment intermediaries the requirement is set in ICOBS 5A / MIPRU 3 with specific minimum limits: broadly €1.3m per claim, €1.9m aggregate (subject to FCA-published sterling equivalents).

Firms handling client money or providing discretionary management face higher cover requirements. Consumer Duty (PRIN 2A) applies fully to retail investment advice.

DB pension transfers — the critical filter

Defined-benefit pension transfer advice is one of the most restricted classes in the PII market. Since the British Steel Pension Scheme (BSPS) and other DB-transfer scandals, many PII insurers have exited or heavily restricted DB-transfer cover.

  1. A start-up IFA planning DB-transfer advice must confirm insurer appetite before commencing.
  2. Some insurers write DB-transfer cover only for firms with an established track record and audited process.
  3. The FCA has restricted new DB-transfer permissions and requires firms to demonstrate good outcomes.
  4. A start-up planning DB-transfer work should engage a specialist broker early — this is the placement bottleneck.

Run-off from previous employer

A departing IFA from an existing firm continues to enjoy PII cover under the old firm's policy for prior acts, provided the old firm maintains PII.

FCA-authorised firms must maintain PII for a period after cessation. There is no equivalent to the SRA six-year rule — the FCA requirement is expressed as adequacy for the ongoing tail of liability.

Confirm at departure: (1) prior acts at the old firm captured under the old firm's policy; (2) old firm will maintain PII for the ongoing tail; (3) client-file transfer arrangements do not disturb this.

First-year sizing

  1. Assets under advice / advice fee income estimate for year 1.
  2. Advice type — workplace pensions, drawdown, DB transfer, discretionary management, mortgages.
  3. Client mix — retail, high-net-worth, corporate.
  4. Ongoing service model — fair-value under Consumer Duty is a material underwriting question.
  5. Personal claims history of the founding adviser(s).
  6. Cover limit choice — MIPRU/ICOBS floor or higher if practice profile warrants.

What a start-up premium typically reflects

The market prices a new IFA firm against advice type, assets estimate, adviser claims history and Consumer Duty implementation. Straightforward workplace-pension advice is the lowest-friction profile; DB-transfer advice is the highest.

Restricted-advice firms (tied or panel) face a different placement conversation than truly independent advice.

Frequently asked

What is the FCA PII requirement for a new IFA firm?
For most retail investment intermediaries: broadly €1.3m per claim / €1.9m aggregate under ICOBS 5A / MIPRU 3, converted at the current FCA-published sterling rate. Firms handling client money or providing discretionary management face higher standards.
Can I get PII for a start-up firm planning DB transfer advice?
Difficult but not impossible. Many insurers exited DB-transfer cover post-BSPS. Some specialist markets still write DB-transfer for firms with a demonstrable process. Engage a specialist broker before committing to DB-transfer permissions.
Do I need PII before the FCA grants authorisation?
Cover must be in place from the day the firm commences authorised business. Some brokers can indicate terms during the authorisation application. Cover incepts at authorisation confirmation.
How does Consumer Duty affect start-up PII?
Consumer Duty (PRIN 2A) applies fully to retail investment advice. Insurers ask about Consumer Duty implementation at first-year proposal — product-oversight-distribution records, fair-value assessment, vulnerable-customer identification. Start-ups without a Consumer Duty framework will find placement harder.
Do I need PII cover for referred investment business under the DPB regime?
If you are ICAEW-regulated under DPB, that regime carries its own PII rules. If you are FCA-authorised, MIPRU/ICOBS apply. Firms sitting across both regimes need a broker familiar with both frameworks.
What if I plan to be a tied agent or appointed representative of a network?
Different regulatory perimeter. As an AR you operate under the principal firm's authorisation and Consumer Duty framework. The principal firm's PII may cover the AR, or the AR may need its own PII — check the network contract.
How long does run-off need to last for an IFA closing a firm?
FCA requires PII adequate to the ongoing tail of liability. In practice, most closing IFA firms carry run-off for six to twelve years, longer for DB-transfer advice given the FCA's continuing focus on that historical exposure.
How much does start-up IFA PII cost?
Highly variable. Workplace-pension-only advice can be a low four-figure premium. Drawdown or discretionary management materially more. DB-transfer advice is the highest-friction and highest-priced class. Apex quotes what the market returns.

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