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Categories:Advisers,Regulation

Advisers face £30m annual FSCS levy, plus possible £40m interim levy

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Advisers are facing a Financial Services Compensation Scheme annual levy of £33m for 2012/13.

The FSCS has today published its plan and budget for the next year, alongside the FSA’s consultation on fees and levies.

The investment intermediation sub-class faces an annual FSCS levy of £33m, out of a total annual levy of £221m.

The levy relates to compensation clains for Keydata, Wills and Co and Arch cru. However the levy does not include likely compensation claims for MF Global.

Advisers could face a further interim levy of £40m before the end of March in relation to MF Global claims. The FSCS warned in December that compensation costs for Arch cru and MF Global could go above the £100m adviser sub-class limit and trigger a cross-subsidy for fund managers.

It is unclear whether advisers will also have to cover the cost of compensating US investors affected by the collapse of the failed investment brokerage.

FSCS chief executive Mark Neale (pictured) says: “Our accountability to our stakeholders and our commitment to keep costs to a minimum remains a key priority for us. A major focus for us in the coming year will be to pursue recoveries from major failures in order to reduce the costs on the industry.

“The existence of FSCS and its ability to respond to unpredictable workloads contributes to financial stability. That is why it is important for FSCS to invest in order to enhance its capacity to deal with large or multiple failures.”

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Readers' comments (12)

  • Splendid! So much good news and it's only Thursday.

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  • May I make a suggestion? when reporting FOS or FSA costs or data that all us dreadful IFAs have to pay because we are so bad at our jobs... could you possibly provide some context - such as how they arrived at these figures and whether with your penchant for attention to detail you believe that the sums are fair, fairly fair or completely bonkers? How about also putting in some comparisons to last year, or better still the costs over the last 10 - or since the birth of the FSA....then perhaps we can reflect and consider thoughtfully rather than merely rant that £30m is an obviously large number.

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  • And if a few others tumble as a result of fraud, missmanagement/poor decisions, Euro crisis/collapse etc etc.....we pick up the tab!!!
    If I wanted to be a "name" I would have joined a Lloyds syndicate as there is a chance of some upside instead of all the liabilities for which we are NOT responsible.

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  • Well, well, well surprise surprise. FSCS fees go up plus special levy.

    FSA budget goes up

    Removal of trail commission, loss of contracting out commission. MAS budget doubles. Short of closing us down completely is there anything else left they can stuff us with.

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  • If none of us pay, what will they do then?

    The only way these people will ever listen is by IFA's for once in their lives sticking together and sticking 2 fingers up to the powers that be. If we all refuse to pay and continue with our business as usual they can't ban/fine/prosecute us all The gravy train would collapse.

    However, too many will stab each other in the back and the providers wouldn't back us either.

    I'm off to calculate the increase in my client charges.

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  • Has anybody in the UK advised on MF Global products?

    How am I on the hook to compensate US investors for the collapse of a US company, where it looks like high level fraud has taken place.

    I am only sitting here advising clients on their pensions and ISA's for gods sake!!

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  • Has anybody in the UK advised on MF Global products?

    How am I on the hook to compensate US investors for the collapse of a US company, where it looks like high level fraud has taken place.

    I am only sitting here advising clients on their pensions and ISA's for gods sake!!

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  • What would happen if the authorities tried to make the police financially responsible for all the unsolved crimes/burglaries etc ?....well, we know the answer to that....!!

    We are the 'fall guys'...'sitting ducks'.....and we just have to take it on the chin...paying the price of the FSA's failures....makes me sick!

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  • The FSA want us to have a sutainable business model, and yet the FSCS are charging fees that leave us with no certainty of cashflow and less able to build a business, because of ad-hoc fees.

    So now we need cash to cover new rules and we need further cash for ad-hoc fees and we need to keep our business up to date for back office etc.

    There are not many business models that can sustain the onslaught over a long period and particularly when we avoided the rubbish.

    Nor should we be held repsonsible for US investors. I do not think that the US authorities would reciprocate

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  • £40.5m for "coordinating" debt advice? What the hell does "coordinating" mean? Apart from the very small proportion of bad advice along the lines of increasing mortgage borrowing to fund speculative investments (which is covered anyway within the existing system) and possibly excessive mortgage borrowing (now largely a thing of the past), in what way is the regulated element of the FS industry remotely responsible for people getting into excessive debt?

    Excessive debt appears to centre primarily on credit and store card borrowing, which is all but totally unregulated (though, as I have proposed numerous times in the past, card borrowing limits most certainly should be regulated). Why should the regulated element of the FS industry be forced to pay for advice to people who've run up excessive debts as a result of irresponsible borrowing practices that are nothing to do with us?

    A quick Google search on debt advice reveals a whole slew of organisations offering FREE debt counselling, not least http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingDebt/PlanYourWayOutOfDebt/DG_187500. On what basis does the MAS consider it remotely justifiable to charge the FSA industry £40.5m provide yet another debt advice service on top of all those that already exist? There's the problem, of course ~ the FSA doesn't have to justify anything to anybody other than "its own board" and the government has already announced that the FCA will enjoy exactly the same total freedom from accountability. As head of the TSC, Andrew Tyrie can huff and puff for all he's worth but the bottom line is that Sants & Co can just thumb their noses at him, as indeed he all but did last March.

    And where's the Cost:Benefit Analysis for this huge increase? MIA, as usual, as seems now to have become standard operational practice for the FSA and all its subsidiaries, despite claims on fsa.gov.uk that all new regulatory initiatives are subject to prior Cost:Benefit Analysis and consultation ~ consultation? What a pigging joke the FSA's idea of that is.

    In fact, the funding of the whole MAS quango is a complete (extremely bad) joke. First of all it extorts £43m from the industry for its first year operating budget then, five minutes later, we read that it's dumping half its staff because there isn't enough for them to do. NOW we read that it's going to be INCREASING its budget for "delivering money advice" to £46.3 million (a bigger budget for half the number of original staff and, by implication, half the workload?) and adding a further £40.5m to provide advice on debt that's nothing to do with most of the FS industry and for which a host of agencies ALREADY exist providing free advice in this very area.

    You couldn't make it up. It's just RIPPING OFF the industry and doing so at a time when the industry, in particular the IFA sector of it, is least able to afford any more levies for anything. Yet Hector Sants would have us believe that the FSA has no prejudicial agenda against the IFA community. The FSA's actions tell a VERY different story. The FS industry is no longer a golden goose. Rather, it's now a very badly sick and ailing goose.

    Oh yes ~ as for the £20m to be spent on a new consumer awareness campaign, this another vile joke. First the MAS spent £4m+ on a TV ad campaign that's flopped so NOW, with no Cost:Benefit Analysis, it's going to spend almost FIVE TIMES that sum in the hope of achieving...............just what exactly, in terms of quantifiable consumer or industry benefit?

    All the industry money in the world can't change the hard facts that the general public has no confidence in the FSA's ability to regulate the industry properly (let's face it, ALL the media coverage of the FSA is resoundingly negative) and no confidence in committing to any sort of long term retirement savings plan (because the government has reneged on the Conservatives' pre-election manifesto pledge to put right as much as possible of the damage done to the pensions framework over the past 25 years).

    And because of the state of the UK economy, largely as a result of the FSA's admitted failure to regulate the banks, an increasing proportion of the UK population doesn't have any spare money anyway.

    But never mind ~ it's all just OPM, so what the hell? We know what's best, so just pay up or pack up.

    What will you say to consumers, Mr Sants, when half the IFA community has thrown in the towel (or gone bust) and most consumers can't afford the fees that the remaining half will need to charge to meet all these excessive levies, the FSA's £30m bonus pot (despite your recent, decidedly less than flattering comments on the quality of a significant proportion of your staff) and our ever-escalating PII premiums, not to mention our profit-crushing workload for every piece of advice we give as a result of the FSA regulating everything by hindsight because it routinely fails to do its job properly in the first place?

    It's been quite an effort to compose this post without including a few choice swear words. Add your own as you see fit.

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  • MAS - im an ex F2F adviser for this service worked for £18k salary giving advice mostly to those on benefits - helping with basic budgeting. I really don't see where all this money is being spent.

    Alot of the guys doing F2F are advisers who have come out of the regulated industry.

    How this being handled on the top level sitting in Canary Wharf is a complete joke. There really needs to be some form of regulation around how funded organisations actually spend money.

    I'm sorry but there is no way the CEO's at FSA, FOS MAS can justfy those salaries. They are taking money from some hardworking IFA's who probably earn less than 30k pa and spending it like no body's business. It's because of people like this this country is in a mess.

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  • When are IFAs going to have to pay compensation to bank account holders who are not being told to switch their cash ISAs to newer high interest accounts and other bank failings.

    I consider it totally unfair on the FSA for not blaming all the IFA community for this obvious miss selling.

    While I'm at it I really think it's great that the yanks can claim compensation from us for a contract they couldn't get legally in their own country. Maybe the FSA should really help the rest of the world get compensation from all of the british IFA community and then they would then finally have ackeived their aim of killing off our industry.

    By the way I am not writing this from the lunatic asylum known as the Financial Services Authority but from our local asylum where I am going to be receiving electric shock treatment to try and bring me back from my fantasy world - oops I've just been told the treatment is cancelled - i'm not mad, it's all true!!!

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