Advice firms say providers should cough up for FSCS costs

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More than three quarters of advisers believe providers should contribute to the Financial Services Compensation Scheme intermediary funding class, according to Apfa research.

A July survey of 262 advisers found that, on average, respondents thought the provider contribution should represent around a third of the cost.

More than two thirds of respondents said a risk-based levy should be based on the volume of risky products sold by a firm while 59 per cent considered it should be based on the number of successful Financial Ombudsman Service complaints made against it.

Apfa director general Chris Hannant says the survey shows strong feeling among advisers for providers to pay their share.

He says: “The coming rules on product governance place a clear responsibility on such firms which should be reflected in a contribution to the FSCS fund.”

In a note to members this month, the Association of British Insurers warned its life and pensions members they could soon face FSCS levies if the FCA goes ahead with plans for providers to contribute for adviser failures.

Hannant adds: “The FSCS levy system needs fundamental change. Compensating people who have received a bad service, been missold a product or conned should be the last resort.

“Prevention is better than cure and so it is important that the FCA focus on stopping the losses in the first place.

“More needs to be done to keep retail clients away from unregulated products and tightening the current regulatory framework will reduce the likelihood of scams and sale of inappropriate investments.”