FCA rejects advice long-stop

Clock money 620 x 430

Advisers will not be given a long-stop protecting them against future compensation claims, the FCA says.

It considered introducing a 15 year limit on financial advice liability as part of the FAMR – published today – but concluded “this would not be in the interests of consumers”.

It says this was a particular risk in relation to long-term products.

The review also considered a variable long-stop linked to the terms of individual products.

But it says the limited benefit and complexities faced by the FOS as a result meant this was not a proportionate response.

However, the FAMR does recommend the planned review of FSCS funding explores reforming funding classes, whether firms’ contributions could be smooth, and the introduction of risk-based levies.

In addition, the report warns smaller advice firms are struggling to obtain adequate professional indemnity insurance at an affordable price.

This is turn is leading to more firms failing and falling back onto the FSCS and the FCA should consider reviewing the relationship between PI cover and the FSCS, the review says.

Old Mutual Wealth chief distribution officer Richard Freeman says: “High-cost and unpredictability in the FCA rejects advice longstop levy has become a burden on adviser firms, prohibiting small business owners from investing for the future.

“The FCA and Treasury have today recognised these concerns and we believe that a more proportionate FSCS levy on advisers will help create economic conditions that allow firms to grow.”