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.
- 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.
- 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.
- 57% of respondents felt that a product levy could also fund the MAS.
- 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.