View more on these topics

Bad times for good firms

It is in this spirit that I write this as an open letter to ask you to consider an important and pressing issue currently facing all independent financial advisers regardless of their size. I refer to the ever increasing burden of the Financial Services Compensation Scheme levy.

“No taxation without representation” has been both a rallying cry and a recognition of injustice since the Boston Tea Party yet, not for the first time, all IFA firms have recently been faced with dramatic increases in their compensation scheme levies.

These are costs over which they have absolutely no control nor influence. Quite simply, it is a case of the good firms, who continue to provide their valuable services to consumers, paying for the bad who have either been for-ced out of business or who have chosen to deliberately walk away from their responsibilities by dumping their liabilities on the rest of the sector.

To add to the injustice, most of these liabilities arise not because advisers have set out to mislead clients. Rather they have presented in good faith products they believed were designed to meet their client&#39s needs only to find that dramatic changes in market conditions, again matters over which advisers have no control whatsoever, have led to disappointing results.

Ten years ago, I called for a product levy to be established, a call which was unfortunately rejected. Now, as the failings and unfairness of the current system become ever more obvious, I believe it is time for the issue of a product levy to be looked at again and I respectfully ask that the FSA do so as a matter of urgency.

The principle of a levy is already accepted in gen-eral insurance. Given the enormous volume of premiums in life, pensions and investments, I believe the impact of a levy on any individual policy would be very small whereas the benefit to the long-term stability of the financial services sector, and therefore its clients, would be significant.

I appreciate that the establishment of a product levy will take time, indeed it may well require some adjustment to current legislation but I am confident that if the will to make the change is there it is achievable.

Without action, the logical or, more accurately, ridiculous result of the current compensation system is that ultimately a single IFA could be faced with the whole of the costs of the FSCS. This is not only tot-ally contrary to natural justice and probably human rights but also cannot possibly have been the intention of Parliament when passing this difficult and complex legislation.

In the meantime, the product providers, who to their great credit have helped IFAs in previous years, should be enc-ouraged to increase their assistance to smaller companies which are least able to meet the costs which the current compensation system arbitrarily imposes upon them.

I hope you will agree that this is an important issue which needs to be add-ressed and that as a matter of urgency the introduction of a product levy to replace the current system should be fully investigated.


Britannia staff move to Axa in sales tie-up

Britannia Building Society is transferring its sales team to Axa Sun Life and signing a deal to distribute Axa&#39s life, pension, protection and investment products. The partnership, which will run from January 2005, coincides with the new FSA rules on the sale of regulated products. Britannia members will be able to buy Axa mortgages and […]

Halifax identifies long-term cooling of house market

House price inflation is slowing, according to Halifax, which recorded a rise of just 1.4 per cent in September. This was an increase on the 0.5 per cent fall in prices in August. However, Halifax says the increase in the last three months was just 2.7 per cent, less than half the 6.1 per cent […]

Accord offers US Libor tracker loan

Accord Mortgages is launching a five-year US Libor tracker mortgage. The London inter-bank offered rate is the rate of interest at which banks borrow funds for US dollar deposits. The rate charged is set on March 31, June30, September 30 and December 31, plus the tracker rate of 1.99 per cent. Maximum LTV is 95 […]

&#39Advisers in the dark on tax credits&#39

Advisers do not understand the current pension tax credits system, says Pension Commission chairman Adair Turner. Publishing his report into UK pensions, Turner said IFAs are as in the dark as consumers about tax credits which has led to a false belief that the highest earners are the best incentivised to save. Turner says: “When […]

Health services

Challenges and opportunities

By Sarah Scott, marketing consultant On 22 February this year the charity Diabetes UK launched a fundraising initiative, #Swim22. They challenged individuals to swim 22 miles over the course of 89 days – a distance that equates to the width of the English Channel. Because of the time period the challenge is spread over, it […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm