Aifa is calling for the Financial Services Compensation Scheme to act quickly in compensating Keydata Lifemark clients to ensure the resulting claims are dealt with in one financial year and therefore likely to be spread between IFAs and providers.
Around 23,000 savers, who invested £349m in Lifemark-backed Keydata products, could be entitled to claim up to £50,000 each in compensation after the FSCS announced yesterday that they were eligible for compensation. The FSCS says it is still unclear how much Lifemark investors have lost but that this uncertainty should not delay the claims process. A further update on compensation calculations will be given next month.
In March intermediaries were hit with an £80m levy for the 2009/2010 year, the majority of which related to Keydata subsidiary SLS Capital after the FSCS controversially classed Keydata as an intermediary. Regulatory Legal is judicially reviewing this verdict on behalf of a large group of advisers with a court date set for the beginning of November.
The current investment intermediary levy for 2010/2011 is £24m. Lifemark compensation claims, alongside claims relating to A2O, Wills & Co and Integrity could lead to the sub-class breaching the maximum £100m levy. If this occurs further claims will fall onto the investment provider sub-class. If total claims for the investment class rise above £370m further claims will be paid out by the rest of the industry.
Aifa director Robert Sinclair says he hopes the claims can be dealt with quickly in one single chargeable year to ensure costs are shared with providers.
He says: “It is good news that the FSCS is moving to give clarity to consumers at an early stage. While this could be bad news for advisers, and the industry, it is important to establish the full cost as quickly as possible and raise any levies in a single, chargeable year.
“We hope the impact can then be spread fairly across the wider industry rather than falling wholly on the shoulders of adviser firms, many of whom deliberately avoided advising on this entity.”