Product providers will have to contribute more to the Financial Services Compensation Scheme under new proposals outlined by the FCA today.
After an industry consultation, the regulator is proposing that product providers will have to contribute around 25 per cent of the compensation costs which fall to the adviser funding classes.
Money Marketing understands the proposal has been vigorously contested by provider groups including the Association of British Insurers in meetings with the FCA.
The FCA says in its paper: “There was support in the responses to the consultation for compensation costs to be divided equally between product providers and intermediaries. There were also strong views from product providers on ensuring an appropriate reflection of responsibility, given that the majority of claims on the FSCS over the last four years have been in respect of intermediary classes.”
The regulator is also planning to merge the life and pensions and intermediation funding classes, meaning advisers will no longer pay levies based on how much pensions business they write compared with investments, but be charge on overall volume instead.
Threesixty managing director Russell Facer hopes the FCA continues to focus on “supervisory activities to reduce down the number of claims on the FSCS rather than just focus on splitting the compensation pot”.
Last week, Money Marketing revealed the FCA had decided to pave the way for a risk-based levy by introducing a new section on firms’ Gabriel returns where they will have to disclose non-mainstream pooled investment sales from April next year.
NMPIs rely on “unusual, speculative or complex assets” and include the likes of unregulated collective investment schemes and traded life policy investments.
This has been confirmed today, as have measures to introduce debt management firms to FSCS coverage and extending FSCS protection to structured product intermediation.
Aegon pensions director Steven Cameron says: “The FCA’s proposal that product providers pay 25% will no doubt split the provider community but should be examined on grounds of fairness and affordability across industry players including fund managers.”
Cameron adds: “Our adviser research shows a strong support for some form of risk based levies, for example where advisers are involved in higher risk products so it’s important the FCA continues to explore this as well as looking for improvements to the operation of the [professional indemnity insurance] market to reduce the overall claims falling on the FSCS.”