MM leader: New levy is an unacceptable burden on advisers
Share
And so IFAs are left to carry the can for the failings of structured product providers, stockbrokers and regulators.
News that the Financial Services Compensation Scheme is to hit investment intermediaries with a £70m levy to pay for the failings at Keydata,
Pacific Continental and Square Mile does not sound like a fair deal.
Keydata marketed itself as a structured product provider, yet was authorised as an intermediary with the FSA and so advisers, rather than investment providers, must foot the bill.
Stockbroker Pacific Continental went bust early last year, with the FSA stating the firm had a “reckless disregard for standards”. Questions
must be raised as to why the FSA let this company operate for so long when you read through the long list of failings at the firm.
The £70m levy will require the 6,500 investment adviser firms to pay an average of £10,000 per firm within 30 days of receiving the bill. This will
depend on size and certain firms will be hit with much bigger bills.
Added to this, the FSCS says it is likely that the £20m cost of claims for NDFA and Arc Capital & Income will also fall on intermediaries despite the FSA uncovering failing with both providers and advisers.
If this extra £20m does fall on investment advisers, it would break or the first time the £100m ceiling on the levy that advisers can pay, with any excess paid for by the fund management industry.
This overflow mechanism is the welcome result of previous FSCS reform, lobbied for by Aifa and others, to limit the damage done to a particular sector in the event of a big firm going bust.
But surely there is a case to say that the fund management industry should be paying a large share of this £90m bill. As things stand, they
will currently be paying a levy of just £3.5m to the scheme.
Keydata marketed itself as a product provider and was widely seen as such by the industry, yet when it goes bust it is left to advisers to stump up the cash.
Consumers who have been missold financial products by companies which go bust must have a reliable route to recovering a decent proportion of their losses.
But the share of the bill currently being thrust upon advisers is out of proportion with their role in these events.
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
View results 10 per page | 20 per page | 50 per page
Readers' comments (36)
Evan Owen | 18 Feb 2010 11:21 am
I hate to say that this will not be the end of it.
One day there will be just one firm left to pick up the tab, Mike Fenwick predicted this in 1985.
All this will all end in tears, not political or regulatory tears because they move on after they create the mess but those of decent advisers who cannot escape the liabilities unfairly apportioned by those in power and who avoided the likes of NDF and Keydata despite the high pressure sales pitch and the 'recommended' product listing in network panels.
I would ask why all advisers have to pay for duff products, the ones who should pay are those who actually sold some of these lousy investments, those who had shares in teh firms and any connected parties to what appears to have been fraud.
Unsuitable or offensive? Report this comment
Peter Emery | 18 Feb 2010 1:01 pm
This proves beyond any doubt that we need a proper union not one man and his dog with a £5 budget.
In what other industry could the manufacturer make the retailer responsible for design faults in the product?
Unsuitable or offensive? Report this comment
Incompetent Regulators Awards Team | 18 Feb 2010 1:01 pm
As I said before on many occasions, the product should be regulated and not the advisers. And of course needless to say by competent people who know the business and not like the current monkeys.
Unsuitable or offensive? Report this comment
Peter | 18 Feb 2010 1:02 pm
Everybody should refuse to pay this totally unfair levy,unfortunately we all know this will not happen and those that did refuse would be barred from advising leaving those left to pick up the tab.
This is a totally ludicrous situation with no common sense or sense of justice moral or otherwise being applied.
I for one am very disillusioned and wonder how much longer the industry as we know it has got left.
Unsuitable or offensive? Report this comment
SIMON MANSELL | 18 Feb 2010 1:15 pm
FSCS interim levy will put firms out of business!
The persecution of independent advisers continues unabated! If the retrospective application of RDR level 4, five hundreds hours of degree level study by 2012 and the expected cull of 10,000 independent advisers didn’t do it then the interim £70m levy imposed by the FSCS on advisers to be paid by the end of April, will do!
I have had many e-mails from fellow IFA's & some are now saying its time to call it a day as it’s no longer viable to operate as an independent adviser in the face of this regulatory onslaught caused by the very failure of the regulators themselves.
Just look at the facts - this is an industry to get out of not get into!
Unsuitable or offensive? Report this comment
Michael Fallas | 18 Feb 2010 1:19 pm
I would suggest that all IFA's challenge this and consider a "class action" against the FSA for all their failures.
We pay the FSA to supposedly protect the consumer and yet we end up with all the financial burden when it goes wrong so what is the point in paying the FSA if we end up with all the bills for all their mistakes anyway ?
Keydata was not an IFA failure it was a regulator failure as are stockbroker failures.
Regulation is a failed system and anyone that thinks it is not must surely be dilusional.
With costs approaching nearly 1/2 £ Billion this year just for the FSA it is utter madness.
Banks nearly bankrupt the country and yet still make £Billions in profit yet seem virtually unaccountable for their actions and still reward themselves as if they have done nothing wrong.
Soon no one will be able to afford to keep "the nutters" in the manner to which they have been accustomed to.
What has regulation actually improved ?
Are people better off as a result?
Unsuitable or offensive? Report this comment
Mike | 18 Feb 2010 1:34 pm
To escape all this, has any considered registering with a different regulatory body (other than the FSA) in another EEA country and then passporting back into the UK. I've rang a couple of foreign regulators and they are happy for this to be done and I've also called the FSA and spoke to them and they've confirmed that we can do this as well. From what I understand what's really required is for one of the Networks to open an office in one of these countries and then we can all join their network. This will provide proper competition in that you could possibly choose your regulator. It would mean that a decent, fair regulatory regime would grow and a bad one would fail. Networks - it's over to you!!!
Unsuitable or offensive? Report this comment
Bill Taylor | 18 Feb 2010 1:52 pm
It seems to me that the FSA could retrospectively change the authorisation from an adviser firm to a product provider. Clearly that is what Keydata were and if the FSA misunderstood the nature of what the firm were doing then I think we can be magnanimous and forgive them this once. Just so long as they say" sorry, we made a mistake and will put it right". They did so with Northern Rock but of course that was a bank!
On a serious note, if the FSA should have authorised this firm as a product provider they, the FSA, were negligent and cannot expect the wrong sector to pick up the tab. So, does anyone actually know for sure how Keydata ought to have authorised?
Unsuitable or offensive? Report this comment
Anonymous | 18 Feb 2010 2:20 pm
To say that the regulator has failed is totally unfair. They are carrying out their remit with vigour and success. That remit is the obliteration of bank opposition ( IFA's ) or any other system that works towards client benefit. The exercise of bankrupting us first is just a part of the softening up process.I agree with the comments of Evan Owen 'this is just the start of it' if we don't stand up and take action now it is all over. A mass refusal to bail out yet another regulatory balls up will make them sit up and take notice. They cannot continually bully and persecute IFA's with total impunity.
Unsuitable or offensive? Report this comment
ken | 18 Feb 2010 2:27 pm
Clunk - is that another adviser's door closing for good?
Unsuitable or offensive? Report this comment