Views from the Front Line


Our recent FSCS Levy Survey was completed by almost 500* independent financial advisers and the results produced almost 100 pages of comments.

Upon completion of the survey, we sent results to Martin Wheatley at the FSA, Mark Neale, at the FSCS, Chris Hannant at AIFA and Mark Garnier at the TSC.  We were gratified to have received the below response from the FSA.

If you would like to respond to the on-going consultation, and share your views, please click on the link below.

Thank you very much for the email to Martin Wheatley (below) with the results of your survey, which has been forwarded to us as the team that oversees the rules for FSCS funding.

Feel free also to respond to the on-going consultation on FSCS funding (, which would allow us to understand the views you have on the specific proposals we are making. The deadline is 25 October 2012.

Finally, please also note that the FSA consults every year on annual management expenses of the FSCS (i.e. the FSCS budget), so we invite you to share any views on this particular aspect through that channel also. The consultation is held in January of each year, with the next one scheduled for January 2013. For reference, the previous one can be found here:

Many of the IFAs surveyed suggested an alternative product levy, payable by consumers as a solution. Or that those receiving compensation from the FSCS should have an excess deducted to discourage illegitimate claims.

Here are some comments that we found particularly interesting…

How easy has it been/is it to provide FSCS Levy Data i.e. the breakdown of income according to fee block which decides what your fee will be?

“Rising costs, pressure to reduce fees. It seems people in safe civil service jobs are out of touch with the private sector and how tough it is and treat us as a cash cow.”

“Problems occur when they change the basis on what they are asking us to provide the information and do not give prior warning. As a result we find out when it comes time to make the return.”

“The FSA and FSCS always try to standardise things from a perspective of bodies who do not understand the industry. Life is not like that in the IFA world!”

How have you apportioned fee income on your returns? i.e. fee paid by a cheque for wide ranging advice in several advice areas e.g. pension, life and investments and unregulated.

“Based on what is required it would have to be apportioned appropriately, though the practicality of doing so would be time consuming with no idea of who benefits from the information being provided to such a detailed level.”

“As far as I am aware, there is no option to put it as general advice, therefore, fees automatically come under an incorrect heading – leading to unfair charges potentially.”

“It is very time consuming to break down the income and as a single IFA this is valuable time wasted”

Should any future levy be part of mandatory disclosure to the client so that they can see what the cost of the levy is in actual monetary figures?

“We are obliged to show how much is ‘earned’ on every client specific illustration for every plan and I think it would be both logical and fair if there was a second figure (or percentage) that showed how much money was paid out for FSCS, FSA, FOS, PI, Interim Levy etc. Otherwise, the perception created is that we all make huge sums of money for what sometimes seems like not too much work if a case isn’t overly complex.”

“Levies and fees are now becoming a ridiculous financial burden and the regulators just don’t seem to care a jot. They always start any announcement regarding increases to levies or fees by saying that they realise the financial environment is difficult for all but they just go ahead and do it anyway. It is infuriating and wouldn’t be allowed in any other walk of life.”

“There is too much information already. Clients don’t read it because they can’t see the wood for the trees and life is too short. Less is more with disclosure: an A4 sheet could contain all necessary disclosure information.”

Does there need to be more transparency over how the FSCS arrived/calculates at its levy for 2012-13

“It continues to baffle me that a company with no complaints in its history has seen its levy rise almost 10 fold and those who sold the products have left the industry or phoenixed.”

“Let’s know how much is used for hospitality/bonuses/inflated salaries and pensions as well as the golden handshakes on retirement.”

Do you believe that the current system unfairly penalises responsible firms for the malpractice of others?

“FSCS funding should first be taken from firms who have done (proven) intentional wrong. Remaining funds should be taken on a risk-based approach focussed on the number of complaints a firm has had upheld.”

“The individual should have their own professional indemnity so they carry the liability and not the firm. That way if a firm goes bust and the advisor continues practicing the claim follows him and does not fall on the FSCS. Firms could be responsible for ensuring each individual has PI a bit like having a licence to practice.”

“In what other field do the good practices pay for the bad practices? Liken it to the breast implant scandal. Who picked up the tab there? The taxpayer through the NHS, as the guilty parties refused to assist their former patients without them paying another fee to correct damage caused by them.”

Can you suggest an alternative to the current FSCS system?

“FSCS should solely be covered within the cost of FSA approved products. Products should have a ‘kite mark’ of FSA approval and state ‘approved and regulated by the Financial Services Authority’. PI insurers should have to grant specific approval if an adviser is recommending a non ‘kite mark’ product/solution. Therefore, if an adviser is only recommending ‘kite-marked’ products – and that could still be within the definition of Independence- their PI costs should be significantly lower. Kite marking should incorporate the payment of the levy for a replacement of FSCS. This should be a relatively low cost, as the products/funds will have already been approved by the FSA, there should be very few failures.”

“Look at what other industries do – how do they cope? Shouldn’t it be down to the PI insurers to pick up these claims? Isn’t that what we’re insured for?”

“A levy should be applied to the product which is transparent & payable on purchase. The higher the risk (as determined by the FSA) the higher the levy.”

View the entire survey results with comments here


Sarah Paul, Marketing Director, PanaceaIFA

*The survey of 491 IFAs conducted in August 2012 by PanaceaIFA collected both quantitative and qualitative data.

FOS urges


It is not often that one could say that the FOS has assumed a high moral ground position but this may be just one of those occasions if not an actual regulatory landmark.

It has, some may rightly say, urged Liverpool-based IFA The Matrix Model Group to pay out  more than the £100,000 maximum compensation it can demand, to a couple it said had been miss-sold unregulated collective investment schemes.

What is an urge? Well it is defined as “to force or drive forward or onward” and in Regulation Street E14 the next logical step to urge is to enforce.

The FOS adjudication said Matrix was wrong to deem that several UCIS and enterprise investment schemes were medium risk and suitable for the clients.

What the outcome will be we do not know but this move should be taken by IFAs as a very big wake up call. It will also sound alarm bells at the FSCS as payouts of this level could finish many firms, leading the FSCS to be ‘encouraged’ to pay out more.

UCIS are what they say on the can. UCIS are described as unregulated because they are not subject to the same restrictions as a regulated CIS in terms of their investment powers and how they are run.

Although these schemes themselves are not authorised or recognised, persons undertaking regulated activities in the UK in relation to UCIS (including providing personal recommendations, arranging deals and establishing, operating and managing schemes) will be subject to FSA regulation, and that is where it all starts to go wrong.

There is no doubt that for some clients this could be an appropriate investment opportunity. But given the regulatory quicksand in an IFAs path and the significant dangers presented in recommending regulated products that could turn out to be either unsuitable or not fit for purpose, one must ask why would anybody in their right mind touch anything that is unregulated if that places you, as a result, into the regulated world the UCIS product has been designed and built to avoid? And no matter how good a recommendation it would be for your client.

In some 135 days time the seismic shift to an advice based business model from a product distribution and associated reward model will be complete. Yet products will remain unlicensed and not deemed fit for purpose by the regulator. Advisers must have a start the day mantra that says “it is all about the advice stupid”. If they do not it will all end in tears.

And what of PI with this type of product and FOS decisions?

Consumer detriment, intentional or otherwise will be an even bigger focus post RDR than it is now. PI insurers are very experienced at seeing the increasingly expensive consequences of retro regulation and the effect it can have.

This knowledge extends itself to considering the experiences of many well run and untainted firms having great difficulty in getting PI cover not for what they have done wrong but for what a regulator has not done right.

The light is on but….FSCS Survey results

The FSA proposed to hike its annual costs by 15.6 per cent from £500.5m for 2011/12 to £578.4m for 2012/13[i]. This is on top of an FSCS levy of £33m for 2012/13 confirmed in its plan and budget.

The FSCS levy will be consulted later this year and given its inherent unfairness and the ever-increasing large and unexpected cash calls on adviser firms PanaceaIFA hopes these plans change.

In the run up to this consultation, PanaceaIFA conducted a survey to which nearly 500 of you have responded, producing a 100 page document of answers and feedback. Many thanks to all of you who responded.

The results have been sent to Martin Wheatley at the FSA, Mark Neale, at the FSCS, Chris Hannant at AIFA and Mark Garnier at the TSC.

We conducted our survey over a three-week period from mid July to early August and the results are quite alarming in some ways and very predictable in others.

Whilst it would be possible to dismiss some aspects of the survey, as well as some of the methodology, the responses and results do carry weight because of the strength of response and depth of comments.

It appears that the issues raised have not been addressed in either FSA or FSCS research to date and I hope they find the information contained helpful. The point this research reveals is that there is an inherent sense of unfairness about the scheme, what is meant to do and how it is funded.

It also gives some interesting insight as to what alternatives could be considered.

Our survey is ultimately about preventing consumer detriment by digesting IFA perceptions, understandings and appreciation of the FSCS from those who know it best- their IFA funding group.

The message to the FSA, FCA, FSCS and the TSC is clear. Please listen, learn and above all act now before it is too late.

The survey saw 491 respondents and the results, with comments, stretch to some 100 pages. The document makes for compelling reading.

Some key facts to digest

1. Over 47% of IFAs see the data breakdown asked for regarding income that leads to their fee being calculated is difficult to provide.

2. Nearly 50% of apportioned fee income on returns equate to ‘General Advice’.

3. 71% of respondents see that any future levy should form part of a mandatory disclosure to clients so that they can see what the cost of the levy is to them in cash terms.

4. An alarming 97% of IFAs believe that there needs to be more transparency over how the FSCS arrives at its 2012/13 levy.

5. 92% of respondents feel that there should be much greater clarity of the levy by specific product type.

6. Unsurprisingly 97% of IFAs believe that the current system unfairly penalises firms who conduct themselves responsibly

7. 37% of respondents felt that mandatory PI cover should not be abolished, 24% were not sure and 39% felt it should be abolished

8. Some 302 commented on alternative suggestions to replace or improve the scheme- some great reading here.

9. 54% felt that those in receipt of FSCS compensation should have an excess deducted.

  1. This question has produced a very dark position for the FSCS and the industry as a whole. 52% of respondents said that increasing levy calls could put them out of business because they would become unable to pay.
  2. And some 22% of IFAs said that recent requests to ring fence assets could make their firm insolvent and as a result placing them into the FSCS compensation pool.
  3. 57% of respondents felt that a product levy could also fund the MAS.
  4. 64% reckoned they did not have run off cover or could not get it if needed- mainly due to cost.

So will the FSA and FSCS be surprised? They certainly should be along with all those who have concentrated so much on driving through a process that, if this survey is to be believed, has so far manifestly failed to consider the fairness of the scheme upon those who are expected to fund it and how the potential inability to pay ever increasing and possibly unfair levies going forward will many more firms in default inevitably creating consumer detriment for the very people it is meant to protect.

This survey also addressed some demographics, for example over 70% of respondents have been in the industry over 20 years and that 65% were 50 years or more old. And most surprisingly of all we note that some 30% of respondents were part of a network or affiliated to a support group. This shows that Panacea clearly can get to the parts that others often cannot for the greater benefit of the IFA community, the industry and of course the consumer.

As the great, late Steve Jobs said “Design is not what it looks like or feels like. Design is how it works”. With the FSCS it does not and needs to go back to the drawing board.

To see the full report.

What have the Romans ever done for us?

Twitter is an interesting medium for gauging the sensitivities of particular interest groups on subjects of mutual concern.

With this in mind, I was quite surprised to see a tweet from an IFA that said “I support the FSA in the vast majority of things that they do. I think they’ve massively improved the industry. But not on FSCS”.

He is of course correct on the FSCS bit but I am not so sure about the rest. He then went on to tweet that “I’ve found your approach [Panacea?] has been from starting point to be against anything the FSA does, so am not a supporter. Sorry”.

Doing what I do, I always recognise that IFA opinion can be quite divided, but I have never witnessed such unqualified support for a regulator that, in the eyes of many far better qualified than me, has so demonstrably failed Consumers and the industry it regulates.

Is it me? Am I missing something?

It is true that we have on occasions been very critical of the FSA when appropriate and I think rightly so, here are just a few examples:

So with a few of the negatives highlighted we thought it may be interesting to see what IFAs think the FSA has done that is good for the industry, the IFA community, the mass market consumer, their aims, aspirations, hopes and fears.

I’m reminded of the famous line from Life of Brian: “All right, but apart from the sanitation, medicine, education, wine, public order, irrigation, roads, the fresh water system and public health, what have the Romans ever done for us”, we would love to hear from you what you see that the FSA has done for you in a similar vein?

There must be something…………. surely?

Rotten apples removed

We live in a strange world ‘chock full’ of some very strange people with some strange views on what is and is not acceptable regarding how you conduct your life.

This escalates into a different level when those behaving badly are found out to be working in positions of trust or authority.

The quote from Abraham Lincoln is worth recalling. He said that You can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time.”  

The press has highlighted this week some of the latest extraordinary examples of deception that do beg the question about how gullible people actually are.

Policewoman Rachel Hewitt claimed to her employer that her teenage daughter was seriously ill with cancer, and of course in this world of employee rights outweighing any employee responsibilities, her employer did all they could to make sure she was given time, understanding and support to deal with the problem.

This involved compassionate leave, convenient shift patterns and due to her depression caused by her daughter’s illness, time off too.

Her employers did not ask for proof, relying on the integrity expected of her as a serving police officer. She was found out after two years in October 2011 but as yet we are not aware of how. The outcome was 18 months inside.

Also this week we hear of bride Danielle Howard, a PA at the FSA, who had, it is alleged, managed to get well-wishers and complete strangers to contribute £5,000 toward a wedding and £6,000 for specialist cancer treatment that was not available on the NHS. Although she has denied any wrongdoing, she was ‘outed’ as a result of an announcement on Twitter that she was now cured and pregnant. The outcome for her is uncertain but Essex police commented “a 22 year old woman has been bailed until August 6th while we continue with our inquiries”.

With these examples, we often ask what is it that makes normally sane and intelligent people embark on a journey of fantasy for reward? So it was with some sense of regret that we also noted this week that the FSA has fined Adrian Mosley a Yorkshire-based IFA £10,500 and prohibited him from holding a significant influence function or acting as a sole trader over a number of compliance failings.

The FSA found that Mr. Mosley made potentially misleading statements to customers about their rights, telling some of his customers that his services were ‘execution-only’ when they were clearly not and sought to exclude or restrict his duty of care to customers, encouraging them to sign a waiver declaring that they “could see no wrongful advice now or in the future”.

Nice try Adrian, IFAs are have a pretty testing time and although the great Satan’s incarnation on regulatory earth is seen as being the banks, it is clear that even after years of regulation there are still some IFAs determined to try and buck the system and behave very badly.

Although actions of this kind are thankfully rare, the fact that they still happen is of great concern when IFAs are trying to build public confidence in the adviser “brand”.

Bill Sillett, head of retail enforcement at the FSA, said: “In taking this action, we are protecting the public from an IFA who misled his customers and was neither competent, capable nor qualified.”

On this occasion praise is due to the FSA for doing what they should be doing rather than planning and carrying out and awful lot of what they should not.