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Compensation conundrum

Many IFAs will surely welcome anything which spreads the burden of FSA fees across the year rather than face a very painful one-off hit.

Money Marketing has learnt that trade bodies have got together with the FSA, the compensation scheme and the FSA practitioner panel to investigate ways of doing so.

The FSA says it cannot stagger payments itself because it is reluctant to take creditor status. No doubt it believes it has enough on its plate. And yet, as it is responsible for such an intrusive type of regulation, perhaps the FSA should do just that.

But it is outcomes that really count so if another way can be found to allow a spreading of payments, no adviser would object. The problem is that it may rely on life offices’ largesse once again.

As the ending of the cross-subsidy for the compensation scheme demonstrates, they may only be interested in helping out IFAs for a limited period of time until they get a better picture of just how much of the intermediary market may tie up in the coming months. A changed distribution landscape may see many providers reordering their priorities.

The compensation scheme also plans to work actively with liquidators to pursue those phoenixing firms where the FSCS believes they have unfairly dumped liabilities. Most IFAs would welcome this although not perhaps those which have phoenixed and which believe the system left them no choice but to do so.

On balance, this is also welcome news but it is probably a very long-term project. Neither initiative is a substitute for what really needs to happen – a root and branch reform of the compensation system.

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