Advisers should stop using the term “product levy” when calling for Financial Services Compensation Scheme reform, adviser trade body Libertatem has said.
In its submission to the FCA’s ongoing review of FSCS funding, the trade body fronted by former IFA Association director general Garry Heath argues that talk of a “product levy” has not given sufficient weight to historical sales, advisers moving away from product-centric approaches and how providers would incorporate costs into their distribution models.
Libertatem still supports the idea of a product levy however, along with other industry figures like Simplybiz Group chairman Ken Davy.
A product levy is normally understood as a charge on top of a product that would be paid for by consumers and put towards the FSCS. The charge would ultimately fall on consumers in most suggestions, but would be facilitated through providers paying small amounts on each pound of investment or premium they received.
The submission reads: “The phrase ‘product levy’ is unhelpful and has become shorthand for a wider charging scenario. It presumes that this year’s product sales will pay for this year’s FSCS charge. This is only marginally better than the status quo as such a charge on new products only would be a disincentive to obtain new advice.
“It is also the wrong nomenclature as advisers no longer sell products. Within the phrase is a presumption that the product provider would absorb the cost of such a levy within their overall costs. This would be unfair on them and creates unnecessary conflict.”
At an early roundtable meeting for the FSCS funding review, the FCA did not rule out introducing a product levy entirely, but made the point that there would be insufficient time in the current parliamentary calendar to change the relevant legislation alongside the review.
In a letter to Treasury committee chairman Andrew Tyrie earlier this week, FCA chief executive Andrew Bailey confirmed that a product levy was still under consideration.
The Personal Finance Society has also pushed for a product levy, writing to then Chancellor George Osborne to press for its inclusion in discussions despite lack of legislative leeway.