Advisers are furious at facing another big Financial Services Compensation Scheme Keydata levy.
The FSCS said this week it would compensate Lifemark investors who were placed in its traded life policy bonds via failed structured product provider Keydata. It says it is still unclear how much Lifemark investors have lost but that this uncertainty should not delay the claim process. A further update on compensation calculations will be given next month. Around 23,000 savers, who invested about £349m in Lifemark, could be entitled to claim up to £50,000 each in compensation.
In March, intermediaries were hit with an £80m levy for 2009/10, the majority relating to Keydata subsidiary SLS Capital after the FSCS controversially classed Keydata as an intermediary. Regulatory Legal is pursuing a judicial review on behalf of a large group of advisers, with a court date set for the beginning of November.
The current investment intermediary levy for 2010/11 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 on the investment provider sub-class. If total claims for the investment class rise above £370m, further claims will be paid 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.
If the FSCS compensates Lifemark investors, it will take over their exposure to the portfolios and any future returns could be passed to investors who lost over £50,000 or rebated to the industry. The scheme may seek to regain costs from advisers who sold Keydata Lifemark products.
Lowes Financial Management managing director Ian Lowes says: “We could have sold millions of pounds of these investments but we took a view the risks were not properly described in the marketing literature. Most IFAs were nothing to do with this but will have to foot the bill.”
Informed Choice managing director Martin Bamford says: “I would like to see the FSA aggressively pursue those individual advisers and firms responsible for advising on this investment scheme. I hope that innocent adviser firms are not driven out of business by the next levy created by irresponsible advisers.
“There are multiple issues to be addressed here, including the role of the FSA in approving and regulating Keydata and placing Keydata in the investment intermediation category.”
Skerritt Consultants head of investments Andrew Merricks says: “Yet again, we are paying for other people’s mistakes. I wish people would think about what they are recommending.”
Meanwhile, Norwich & Peterborough Building Society chief executive Matthew Bullock is to push ahead with his Lifemark bailout efforts despite the FSCS’s decision to compensate investors.
N&P is leading a group of advisers, including Vintage Financial, who have decided to continue to work on a lifeline for Lifemark as Financial Services Compensation Scheme payouts are capped at £50,000.