80% of IFAs support Aifa legal challenge against FSCS levy
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Eighty per cent of advisers would support Aifa in a legal challenge against the £80m Financial Services Compensation Scheme industry levy, according to an IFA survey.
The Opinium Research survey of 230 IFAs found that just one per cent would oppose a legal challenge and 18 per cent are undecided.
However, if an alternative organisation was to mount a legal challenge 50 per cent say they would show their support, 18 per cent would not and 31 per cent are undecided.
Aifa director general Chris Cummings told Money Marketing this week that the trade body was still waiting for legal opinion regarding the chances of overturning the FSCS’s decision to impose an £80m interim levy on advisers.
He says: “We are looking at two aspects. Firstly has FSCS observed due process? It seems to me they have which is unfortunate. The wider issue is in terms of a regulatory failure by the FSA to subject Keydata to sufficient authorisation checks and ongoing supervision- were they failing to portray themselves in a clear, fair and not misleading way?
“Comments that have come back from FSA are that they have considerably tightened their authorisations procedure, they have introduced the enhanced supervision procedure and are pursuing a more intrusive supervisory regime which is why firms like Keydata are coming out. That is cold comfort to firms that are subject to this unwarranted bill.
“This is so obviously a bill that the IFA community should not be paying that it does put in doubt the operational legitimacy of the compensation scheme because it should not have come to us. Firms are right to feel aggrieved and to feel shabbily treated partly by the Compensation Scheme and partly by the FSA, there is a shared liability.”
Regulatory Legal says it has around 130 advisers signed up to launch a judicial review against the decision, but it may require 1000.
Partner Gareth Fatchett says: “The decisions made by the FSCS show scant regard for the actuality of what happened. The industry needs to show it has the stomach to fight this grossly unfair levy.”
The survey also reveals that 66 per cent of IFAs think it is unfair that IFAs and stock brokers are in the same category for the FSCS compensation scheme where investment advice is concerned.
Ninety per cent think the industry levy has offered an unfair deal to IFAs and 61 per cent think fund managers and plan administrators should equally shoulder the burden of the levy.
Around one in five of advisers say the levy will either have a huge impact on them, or even put them out of business with 16 per cent saying they will not be able to afford to meet the levy demands.
Opinium Research associate director Matthew Webster says: “This is a significant issue for the industry and it is worrying to see that a fifth of IFAs say the levy would have a significant negative impact on their business.”
themoneydebate.co.uk editor John Lappin says: “Even after a huge financial crisis, if the arrangements for the compensation are having such a dramatic impact on adviser businesses it is time to think again. This is not just because it is unfair, and it is definitely unfair, but also because it risks leaving an ever smaller pool of firms shouldering a higher proportion of the burden which eventually frustrates the whole point of having a scheme in the first place.”
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Readers' comments (16)
ian southgate | 31 Mar 2010 1:08 pm
we pay the bill and to date not one Lehman's exec brought to account for trading insolvently
silly me , I thought it was still illegal !!!!!
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Gerry Cooper | 31 Mar 2010 1:22 pm
80% support the AIFA point of veiw?
Are the other 20% in favour of the sector picking up the cost?
Are they mad?
Or are they the ones that sold the stuff in the first place?
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Exasperated me | 31 Mar 2010 1:31 pm
If AIFA couldn't compete with the big guns of the fund managers what chance does it have against the FSCS?
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Anonymous | 31 Mar 2010 1:51 pm
You may as well adopt the position IFA's get screwed no matter which way it goes. If we mount a legal challenge we will pay through the nose. Regulatory were looking for £1000 plus VAT for a copy of a letter on the premise that it 'had council approval' ie; cost times ten.
If the FSA defend a legal challenge we will pay for this also. New recruits (noticably thin on the ground) should be warned that the distribution of financial services is a lose,lose business when your regulator has the autonomy of a dictator.
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Patrick Schan | 31 Mar 2010 2:12 pm
I have seen my MP twice ,and emailed him on several occasions, to discuss the FSA/FSCS and the RDR. I have emailed and written to George Osbourne, David Cameron, Mark Hoban and Vince Cable (from whom I got a rather wet reply). Are enough IFAs doing the same thing. You have to kick up a fuss. There is no guarantee that it will work but If you don't you deserve what you get. It is only the vocal troublemakers who ever get anything done in this country.
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Simon Mansell | 31 Mar 2010 2:49 pm
For one moment I thought AIFA had got its act together - alas no!
It reads 80% of IFA's want AIFA to do what it should already be doing.
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Anonymous | 31 Mar 2010 3:04 pm
I'm not an IFA but I know unfairness when I see it.
IFAs are screwed if they trade, screwed if they don't trade, screwed if they die (estate still liable)
The FSAs long term strategy is to only have banking & insurance sectors and to get rid of the 'peoples champions' the IFAs.
They would prefer to regulate a small number of banks & insurers and not have to regulate thousands of IFAs.
There are few young people entering the industry and I personally would not allow my children to enter such a corrupt industry as I value their well being too much - by corrupt I mean the FSA. They still refuse to reveal the names of the insurers who confirmed to them that they were charging endowment premiums at a rate that would never repay mortgages thus misselling their endowments through advisers. If they did, this would enable advisers to sue the insurers and finally show that they were not the villans but the scapegoats!
I feel sorry for IFAs, you are in your death throes!!! With FSA compliance - no one hears you scream!!!!
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Incompetent Regulators Awards Team | 31 Mar 2010 3:15 pm
Chris
What you should be doing is lobbying the powers that be that all of the FSMA 2000 is flawed. e.g. Get into the MPs who can change the whole system. Not this skirting around and playing politics with little victories as they serve no purpose. Get on with the job at demolishing the F-Pack as they do not do debate and Osborne has arleady said he will break it up. Go on don't be a chicken!!
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Anonymous | 31 Mar 2010 4:43 pm
So they still want to go ahead with a legal challenge. They'd better hurry up, got my bill in the post today for my share of the levy for business i have never transacted. FSCS say they have to pass this on to our sector to maintain public confidence in financial services. The incompetants at the FSA should look to themselves first.
What would the FSA do if we all decided not to pay? De-authorise us all! Come on isn't it time we made a stand together. The FSA has become a bully and we should fight back now.
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John | 31 Mar 2010 4:56 pm
I approached my M.P. (Conservative) following an adverse result from the F.O.S. We all know how difficult and expensive it is to challenge these bodies, but the F.O.S. is after all an ombudsman. I suggested making a case for maladministration that would cost very little, but would need his support. I had a pile of examples just from my case, but I think that the M.P. did not have the bottle to take on the task or he simply did not understand the meaning of the word maladministration. They should be willing and able to help us, but do not hold your breath!
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