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 (http://www.fsa.gov.uk/library/policy/cp/2012/12-16.shtml), 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:http://www.fsa.gov.uk/library/policy/cp/2012/12-03.shtml.

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.

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