Regulatory Legal’s recent High Court defeat in its judicial review of the classification of Keydata by the Financial Services Compensation Scheme is certainly a setback for a fairer investors’ compensation scheme but the fact that the FSCS was taken to court should, hopefully, lead to the regulator reforming the present system which is intrinsically unfair.
We were one of just 200 firms which contributed £200 to the class action. I am disappointed so few IFAs chose to lend their support.
The fact remains that we IFAs are a disparate lot, we do not stick together and we sit by while the FSA’s pro-bancassurer bias threatens our existence. It is very important to take a united stand or we will all eventually be regulated out of business.
FSA head of investment policy Peter Smith recently said: “The absence of complaints is neither an objective measure of competence, nor of good quality advice.”
I disagree. The fact that banks generate 61 per cent of complaints with IFAs on just 2 per cent says it all.
The FSCS levy is badly in need of radical reform. Why should any IFA firm which is classed as low risk, does not sell any risky products such as unregulated investment schemes, structured products, VCTs, EISs, enterprise zone property trusts and film schemes, etc be forced to pay compensation to the ex-clients of such risky firms when they go bust?
Why should the FSA get to keep the fines it levies on firms for their regulatory failings? The money should go directly into the compensation scheme.
Hectors Sants talks about the consumer detriment. He fails to acknowledge the huge consumer benefit most clients get from a long-term relationship with an IFA and his organisation is responsible for massive IFA detriment in imposing a levy on firms such as us.
We, like many IFA firms, have an exemplary regulatory record, we do not conduct risky business. The FSA recently described us as a low-risk firm, we have been established for 25 years and have many happy clients who have been with us for 20 years or more. Yet we still have to fork out for yet another levy.
The compensation sceme levy firms pay should be based on the riskiness of each firm and its disciplinary record.
Badly run firms would bear the brunt of the levy and the FSA’s image would be enhanced.
Tony Byrne is financial planning director at Wealth And Tax Management