DBS and SimplyBiz founder Ken Davy is calling on the FSA to introduce a product levy to combat the huge increases IFAs are seeing in their FSCS bills.
Davy has written to FSA chairman Callum McCarthy about the increasing burden IFAs are facing in their levies to the Financial Services Compensation Scheme and asking him to investigate introducing a product levy.
Davy points out that the principle of a levy is already accepted in general insurance.
He adds that the enormous volume of premiums in life, pensions and investments means that the impact of a levy on any individual policy would be very small but would significantly improve the stability of the financial services sector.
In the meantime, he would like to see product providers increasing their assistance to smaller firms to help them meet the FSCS levy, which has increased by up to 2,000 per cent in some cases.
The possibility of a product levy was investigated by the FSA in 1998 when a consultation document proposed raising money using a product levy paid by consumers but the idea fell by the wayside.
Davy writes: “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 totally 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.”