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ABI wants to leave the levy to advisers

They should think again about watching advisers being wiped out’

The Association of British Insurers has clashed with IFAs after opting to maintain the current funding system for the Financial Services Compensation Scheme despite advisers being crippled by massive fee increases.

The draft response to the funding review, which is yet to be consulted on by ABI members, will recommend minimal change to the present regime and rule out provider subsidies to advisers.

It will reject option B, which is backed by the FSA, the FSCS and IFA bodies, designed to recognise the mutual responsibility of advisers and providers by placing them in the same levy group according to product class.

The ABI will call on the FSA to tighten capital adequacy requirements on advisers to reduce the number of firms going into default and dumping liabilities on to the compensation scheme.

Money Marketing understands that the ABI is also calling for asset managers and mortgage brokers to pay more to the compensation scheme.

The revelation has prompted a fierce backlash from advisers who have seen their FSCS levies almost double over the last two years.

Sources close to the ABI say the hard-line stance has also angered some members, who are prepared to pay more to help their distribution channel.

Aifa director general Chris Cummings says: “This is very short-sighted and an attempt to stall the consultation process. The rise in claims on the FSCS is not mainly due to poorly capitalised firms going into default but complaints against firms that retired legitimately about mortgage endowments that providers are still making money from.”

Personal Finance Society public affairs director John Ellis says: “If providers want an advice distribution channel, they should think again about sitting back and watching advisers being wiped out.”

SimplyBiz chairman Ken Davy says: “There is not a scrap of honourable defence to maintaining the current system which is grossly unfair to the IFA sector.”

ABI spokesman Jon French says: “We believe that the current system is working well and that any changes that are made should be minimal. Any suggestion that we are trying to stall the consultation process by presenting our views is far-fetched.”


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