Regulator to feed back initial thoughts after consultation on FSCS reform
Industry representatives have been invited in for further talks with the FCA over its review of how the Financial Services Compensation Scheme is funded.
The FCA began its consultation on the future of the FSCS in December.
Among the options put out for discussion were making providers paying more into the pot, restrictions on professional indemnity insurance policy excesses and exclusions and increasing the limits of coverage in light of the pension freedoms.
The consultation closed at the end of March.
It is understood the FCA has now scheduled meetings with industry representatives in July to feed back with the FCA’s initial thoughts on the consultation responses.
One source close to the review says: “What’s encouraging is more time is being taken to properly understand the challenges. It did start off a bit too rapid.”
It is understood that meetings will include both adviser bodies and PI representatives.
Another source close to the review says: “We have spoken to some brokers to ask if we can do certain things to be on the front foot as an industry, rather than wait for the regulator to come up with some rules, but they may want to wait until they are pushed a bit further.”
PFS chief executive Keith Richards says he is still backing the professional body’s proposal to merge advisers’ FSCS and PI bill together into one pot.
He says: “We put in a strong recommendation that we need to look at a centralised pot. It’s not just about addressing the spikes or unplanned levies which are very unwelcome to advisers, but we also need a solution that allows advisers to retire without the fear of ongoing cover.”
The FCA also proposed adding a question to its Gabriel returns system for advisers to record sales data about higher risk investment products, with a view to this potentially being used to calculate a risk-based levy depending on the results.
However, Money Marketing has been unable to obtain data from the FCA with an aggregate picture of adviser’s returns regarding PI on Gabriel.
Advisers have to disclose the annual cost of their PI policy, the start and end date, and which insurer they chose, as well as policy exclusions and excesses.
While the FCA has previously said it was unsure on the idea of imposing mandatory terms on PI insurers, it is understood the intervention could take that form if the FCA decides to act.
A senior FCA source says: “If we go down that route there would have to be standard contracts.”