I have again offered my clients fee protection cover, offered by one of the leading insurers, and am just interested to know from others what a typical take up rate is.
Despite some super support from our insurers with the marketing, and my best efforts with chase up letters/calls we have struggled to get just under a 25% take up which seems very poor.
Clients just dont seem interested in fee protection cover.
At this rate the hassle isnt worth doing it next year.
Nicola J
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Replies (26)
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Fee Protection
Zero. I have a strong dislike of such things which I class as little better than extended warranty cover from Currys. They encourage long-winded enquiries. They are an excuse to make money for insurers and an opportunity to make more money out of clients without their being aware that this is going on. It's one of the things that make me question whether I'm in the right profession, when accountants see this as an sales opportunity. That's the way banking went too.
And maybe it's our client-base where enquiries are usually fairly straightforward affairs. Why should someone pay say, £75 to insure against a 1 in 30 (worst year) chance of an enquiry whose costs are unlikely to exceed £1,000?
Keep on trying!
I have been having the same problem but suddenly I said I wanted £1000 up front for any client being investigated if they don't have fee protection and there is an interest!
shaun
Protection
I have ummed and arred (*) with this over the last couple fo years, and decided earlier this year in my annual letter to all clients to highlight the risk of investigation, the fees that they could expect to pay, and recommended that they considered joining the FSB, which provides fee protection.
It seems that they pay roughly the same but enjoy other benefits.
However, I think the take up has been low.
(*) - not sure if this is the correct spelling!
Fee protection
We used to offer this but the take up was 10%. I personally do the job for nothing! I only get 1 enquiry a year and luckily they pick my honest clients. Its just a couple of hours usually.
If the accounts or tax is wrong I reckon some of its my fault! However if it was time consuming and not down to me I would charge.
Perhaps you could be your own insurance company and charge fee protection and keep the lot! If you are getting say £100 from 100 clients and a couple of enquiries you would be quids in.
Fee protection
I don't have fee protection on offer to my clients and I feel much the same way as Geoff . Much as a lot of optional insurance, it's another form of gambling, in a way.
I do have a few clients who are scared of enquiries and want to pay for insurance, but I have a nasty feeling I would be the one out of pocket if I set up a scheme for my practice - I would never want to sell insurance to clients who didn't want it, and would only want to offer it if a client specifically wanted it.
Other benefits of Fee Protection
I undertook fee protection this year for the first time and although take up has been low I am looking to increase this.
I had been advised on various seminars that if I didn't at least offer it to the clients or say that this was available, then I could be negligent in the event of an enquiry. It seems that the number of enquiries will increase in the future a\nd it made sense for my firm to offer this firm now.
There are spin off's (I use CCH) in that the client has a free helpline re tax/ employment issues and I have use of the free helpline for any tedchnical issues that I have found useful too on occasions.
Federation of Small Business (FSB)
I should start by saying that I am not yet a member, but am impressed with the package offered for a reasonable sub. I don't like making money from clients that is not upfront and open, and I can't fathom the cost benefit of the insurance.
If clients are also employers they can get support with employment contracts and protection should they have a claim against them.
So for my money (or rather my clients' money) I think it is worthg steering them to FSB - unless others have had any bad experience of that??
We too have a low take up, but.......
We have a low take up, much as the comments below.
My experience is that those clients who want it (fee protection insurance, that is) want it very much. Those that don't are content not to have it. Attitudes to insurance are personal and vary a great deal. I reckon it is a good idea to give clients the choice.
We too use the CCH scheme, and I agree with Paul Booth's comments about the benefits. When I last reviewed the small print I believe the scheme includes cover for the past affairs of new clients provided their returns were made on time - quite a handy point to make to a potential client if they were of a mind to insure.
If your client uses the FSB then I doubt you would get the enquiry work. I am guessing this would be passed to some other firm - which may not be great for your client. I would have thought the enquiry would run a lot better if it was handled by someone who has an existing understanding of the client's affairs rather than a stranger starting from scratch (as I write, I seem to recall a debate about this some time ago on this website?)
FSB
Yes, I think David Hancock is correct. When I considered FSB, I met with one of their representatives and all the enquiry work is handled by someone else. Therefore not only would I lose this work but also I obviously know my clients and feel that I could offer a better service.
For accountants that don't do enquiry work though, FSB is a good place to start.
Main benefit is phone advice.
I don't particularly like fee protection - it's an awful lot of effort (in mailing and marketing the service) for very little return - about a 10% take up rate.
Most clients aren't that interested, but the one's that are seem to be very interested.
With the FSB scheme Abbey Tax provide the service and do the work - the accountant is out of the picture.
The MAJOR benefit of fee protection for me, however, is the free helpline - particularly on direct tax and VAT. I use this quite a bit and I probably save £1,000 to £2,000 a year in external tax consultants fees.
I'm going to go against the flow here
We have run fee protection for 7 or 8 years now and love it.
For the first couple of years we did the marketing bit - and got take up of around 50%. But it was a whole lot of admin hassle so we bit the bullet and wrote to all clients to tell them it was "obligatory" unless they were insured elsewhere with the likes of the FSB.
Hardly a squeak from the clients - and now we have near enough 100% take up. The admin is really easy - we just add the cost to WIP once a year and bill it when we next bill. Because we are buying cover for about 600 clients it means we get a good rate. The average annual cost to each client is around £75 - which is much cheaper than FSB. And they get access to the employment / legal / tax helpline.
We make a bit on it - enough to satisfy ourselves that we are covering the admin costs. However, we don't see it as a profit centre - just a service to the clients. I disagree with those who say it is not a good bet. The cost is so modest annually, and if anybody can do a full enquiry for less than £2,000 they are doing well. We have very few enquiries, but the cover is very welcomed when we do get one.
It also means that points of principle can be pursued. We have a VAT issue re TOGC going on at present. Had the client been paying he would have abandoned long ago - but the cover gives him the opportunity to pursue Customs (who we are sure are wrong) when it would otherwise be uneconomic to do so.
The only gripe we have is that there are gaps in the aspect cover. We build an allownce for this into the pricing and effectively self cover this.
Fee Protection
I have seen both sides of this in the last year with very different results. I have seen money grabbing practitioners inclined to draw the enquiry out as they were covered to do the work but I have also seen good accountants who although free to undertake the work in house have realised when they were out of their depth and brought in specialist help (yours truly).
I have also seen clients suffer from stress when the enquiry has been drawn out and then I have seen client's who were thankful that their accountant had "encouraged" them to take on the policy. Yes I have also uncovered the FSB practice of restricting the work to Abbey tax and clearly some clients were never aware that this would be the situation.
Overall you get the good and the bad in all things in life and you just have to weigh it up for the benefit of your practice - or should it be for your client
regards and hope this adds to the confusion
[email protected]
http://www.wamstaxltd.com
A Few Points
1 How refreshing that Geoff and Fairie Girl take their view. I think the analogy of extended warranties is very appropriate. We also have very few enquiries each year and the cases are usually cleared up without a great deal of time spent. OK maybe we are losing out on a "sales" opportunity but that is not what being in practice is about surely.
2 I think the Institute recommend/insist that we should offer or make clients aware of these kind of policies. Again if we were asked by clients for the need, we would be hard pressed to justify them
3 I notice that the NFU are now offering farmer clients cover with farm insurance, but the conditions/obligations are very unclear on the documentation I have seen
4 I am pretty sure it is ILLEGAL as an accountancy practice to offer a self-insured scheme, although we did once buy a practice who did this. I believe that you would have to be an authorised/regulated Insurance company
5 What a way to create a good relationship with a client. £1k upfront or I won't do the work
Money grabbing parctitioners....How do they do it...?
William Stevenson's comment about "money grabbing practitioners inclined to draw the enquiry out as they were covered to do the work " caught my eye.
As has often been posted on this forum, accountancy has its share of the good and bad, much as any walk of life.
However, I was under the "mistaken?" impression that the insurers keep a close eye on the progress of the enquiry.
Ironically, none of my insured clients has had an enquiry during the few years I have been operating the scheme (that's insurance for you). So I have never made a claim. But I understand that in the event of a claim I have to submit an initial budget which has to be approved in writing, and any subsequent changes to that budget have to be approved in writing.
So, how does the money grabbing practitioner do it I wonder? Especially when you conisder that the insurance contract includes an indertaking to minimise the enquiry costs.
I hope there aren't many of them getting away with it. It is galling to think that my client's premiums are funding the actities of the money grabbing people observed by William.
Perhaps the fee protection providers could reassure us?
Very interesting
I mentioned the FSB earlier in this thread, and was unaware that their cover meant farming the enquiry work out to someone else - but then again, I find enquiry work (and luckily only had aspect ones up to now) tedious, distracting and disruptive to my workload. So would actually be rather glad for someone else to take it on.
A reason for pushing it more!
Hi Sully
Disrupt me anytime I enjoy Full Enquiries they present interesting and sometimes challenging work.... OK sorry I can get carried away
regards
[email protected]
http://www.wamstaxltd.com
Claims
I have made a claim on the 'insurance' (which is with CCH) and yes you do provide a budget, and have to request stage payments, and I truly dont think for one minute you'd be able to make excessive claims and get them paid if you were that way inclined.
It certainly seems we have a really mixed view point on this subject!
It is worth it
Nicola, having been through several nasty corporate enquiries and having been approached by clients who had heard of such schemes I have found that the admin (which gets easier) and low takeup (22%) is a small price to pay for my peace of mind.
I don't hard sell as it is an optional service however I have started making it less optional with new clients, not because I want to rip them off but because I just don't want the potential relationship problems that come from charging the client huge amounts for thankless & unrewarding work.
I had my first claim this year and it justified the whole scheme, especially as the client was delighted. Oh yes and CCH were straight down the line on what I was allowed to do and they wanted chapter & verse before agreeing the claim.
Finally, as well as the excellent helplines, I don't think anyone mentioned that VAT & PAYE disputes are covered, consequently I consider that any firm is on dodgy ground in not offering something like this.
Will They Pay?
Can those with working experience of claiming on these policies please say whether the insurers will stump up the enquiry fees where the client is found to be at fault?
If not, then surely that would disqualify many claimants - I'm working on the assumption that an enquiry will often strive to find some fault: a secondary "offence", more minor in nature, just in case the Revenue's primary target fails. Of course, from the Revenue's viewpoint the client's enquiry fees become non-tax allowable when that happens.
So do these work like car insurance by covering the policyholder even when he is at fault, but perhaps not when recklessly drunk? How about if an enquiry finds a client guilty of:
(i) failing to declare all his income?
(ii) getting the paperwork wrong for his divs?
(iii) failing to deduct 20% private use for his phone?
Would the insurers still pay the accountant's enquiry fees?
Where Do I Start?
Is Geoff right to compare it with extended warranty from Curry's? Does he always insure his car Third Party only?
I suggest those that find the admin a hassle must not be with PFP (as we are). They supply the brochures etc and, apart from a standard covering letter which we send out, they do all of the admin.
We have for many years offered this type of insurance and I agree that 10% to 25% take up is a fair average. Primarily, we don't offer it to clients for the sales commission, or to try and elongate any Enquiry. In fact, high on our agenda is 'covering one's bottom'. We would far rather have a client decline the cover than complain after selection that we never offered it.
One Enquiry a year, involving a couple of hours............Please let me know what area this is.....I feel the need to relocate!!!!!!
Just for the record
I also use CCH and am very happy with them.
One of the main reasons I use them are the helplines for both clients and myself. As a sole practitioner I find it very comforting to know there is a free helpline I can call to give me advice on all sorts of matters. Even if it is a simple enquiry and I just need to confirm something.
When sending out renewal notices I send out a response sheet saying that the helpline is a free benefit but that it has a market value of £365 per annum. I also ask all clients who do not want the service to tick the "no" box and give reasons. I also state clearly that if they do tick the no box they are then agreeing to be responsible for my fees on the event of an investigation. If they do not reply they are deemed to have ticked the no box and will be responsible for my fees.
Out of 98 invitations to take the service last year 38 accepted (40.43%)
As different rates are used for different sized clients it is difficult to be specific with regard to the the fees paid but on average the annual fee per client accepting was £115 with an average cost of £81.60.
Overall contribution to overheads of over £1,000. Quite acceptable with over 40% of clients having the "sleep at night" comfort of fee protection.
Yes.......They Do.
Fortunately, I have not experienced any insured cases where 'fraud' might be evident.
Subject to that, in all cases, whether there has been negligence or not, the insurer had paid up.
One other warning note
Just another word of caution, certainly one of the main companies offering policies will not cover a claim if a) the return is late and/or b) any entry is made in the "white space" additional information box. In view of the fact that we are told it is good practice to disclose how does this fit. Presumably the insurers think that you are drawing HMRC's attention to a contentious area? They are probably correct
Underwriters' Cop-Outs?
Thanks Robert.
I'm still a little sceptical about an insurance company's ability to indemnify the cost of investigation fees, given that it is only the thin line of "intent" that separates gross negligence from minor fraud.
For example, an insured client who might be cleared of any major wrongdoing but found wanting on some lesser secondary matter (let's suppose he's a self-employed shopkeeper who agrees with the Inspector's contention that he has underestimated his 'goods for own use') might find his insurance claim compromised by the mere whiff of fraud, as surely as Andy's white-space entries would preclude any claim. Does the burden of proof (of 'intent', or equally 'recklessness') lie with the insurance company? Or is it left to the insured to proove his claim by arguing that his actions were innocent?
Furthermore, what happens if the client refuses to surrender quietly? Suppose our shopkeeper argues his 'goods for own use' all the way down to the wire before caving in? Surely the insurance company would regard any prolonged defence as spurious and refuse to pay up?
Come to that, what's to prevent us all from reporting our (insured) clients to SOCA for every remote suspicion imaginable, and then putting up a vigorous and prolonged defence on their behalf?
Extended Warranties
In answer to Robert, the analogy of extended warranties is more that both fee protection insurance and extended warrnties usually represent a rubbish deal. In Currys at the weekend, I was offered a 'special price' for extended warranty on an £70 CD/MP3/DAB thing. This special price was £50. Hilarious.
So it is with fee protection - it's a poor odds bet on a slender chance. I'd suggest that even those who are fans of such schemes would recognise that the total of premiums paid by their tranche of clients would exceed the value of reimbursement for fees incurred on those enquiries. Like most small-scale insurance, the providing companies are selling peace of mind to people who are risk-averse and making a fat profit for doing so.
And no, my car is fully-comp, because competition in this sector is fierce enough to mean I only pay around £20 extra above 3rd party, which is a good odds-bet according to my passengers!
Conversely...........
I don't have enough experience of the business ethics of inurers in this field be be able to remove your fears. However, I can certainly recall a case where a client herself did not have the means to 'take on' an over jealous Inspector.
In the comfort that a recovery would be forthcoming from the insurers, our recommendation that there should be a rigorous defence found favour with her. Suffice to say that, ultimately, despite the client being scared ####### by the thought of her attendance and cost implications, it resulted in a Commissioners listing. At the eleventh hour, the Inspector withdrew her allegations. It may not have been possible to persuade the client to take this course of action otherwise, as she had little funds. Yes, we charged more for the extra work, but justice was done!!!
On the other side of the equasion, we have had a client trading for over ten years who had no cover. The investigation costs were about the equivalent of ten years premiums. However, in my experience, this was quick for a S9A Enquiry .