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Aifa: FSCS should act quickly to ensure Lifemark costs are shared

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.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Fat Chance, shouldnt be in there anyway

  2. What’s the FSA’s stance on cross subsidisation? !!!!

  3. A deal was done?

    Chris Cummings told me the ‘fund managers didn’t want to know’, so the liability was added to IFAs who were PIA prior to N2 despite the fact that Keydata was IMRO prior to N2.

    Something decidedly fishy going on between all parties to the ‘negotiations’ if you ask me, not that you will of course.

  4. As an outsider (queue insults..) I understand the precept to be a type of idemnity insurance with an upper limit, I’d sooner pay that than have somebody after my house because a recommendation failed.
    An acquaintance of mine fell fool of the Keydata debacle despite as much investigations they and their IFA did, there is no defence in law for a ‘gut feeling’ you have to back up these with tangible facts.
    They are understandably a lot happier this morning believing they will get most of their money back, they are however taking a keen interest in what ‘the industry’ says as they will soon be looking for a safe place ( as they did before) to place their savings, the attitude of a lot of the commentators on these sites is pointing them towards the big banks, just don’t cut your nose off……

  5. Does anyone in any position of power actually take any notice of anything AIFA says? Given that I’m still a member and paying my AIFA subscription, I’d like to think the answer is yes, but AIFA does such a poor job of keeping its membership informed of just what it does that it’s impossible to know. A few press reports such as this are all very well, but if nobody’s taking any notice, so what?

    A regular newsletter might help improve member confidence in the worth of AIFA beyond being just a token representative body.

    And we’re still awaiting details of all the campaigns that AIFA’s fought, sorry, lobbied for, on our behalf over the past ten years and just how much, if any, ground it’s actually managed to win on those various campaigns.

    I cannot help but feel that the FSA regards AIFA with little more than patronising tolerance just because it feels it needs to be seen to be “engaging” with industry bodies. So what?

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