PFS chief executive Keith Richards, Threesixty managing director Russell Facer and financial planner Susan Hill sit down with Money Marketing editor Justin Cash to discuss what’s wrong with the FSCS, and how it can be reformed.
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Why not utilise surplus FCA fine money to support the FSCS?
A good starting point but with no chance of success because all FCA fines are confiscated by the Treasury.
What is really needed is for the FCA to start doing its job properly (what hope of that we wonder) and prevent firms from selling unregulated toxic junk, the liabilities for which are almost always uninsured and which drive them into default almost as soon as the inevitable slew of indefensible complaints start rolling in.
The root cause of the crisis of the FSCS is regulatory failure, to which the FCA will never admit and for which it seems highly unlikely ever to be held to account.
Advisers are already prevented from recommending unregulated products, but those who go ahead and recommend them to ordinary retail clients are either ignorant of the law or choose to ignore it. In which case, the FSCS should provide protection for ordinary retail clients, who lose money as a result of the ignorance or negligence of advisers.
Unregulated financial promotions can only be marketed to HNW and Sophisticated investors and the FSCS backstop does not apply for those promotions.
The model is clearly unacceptable when the FSCS levy is higher than your PI cost. The levy cannot be passed onto the PI market, the PI market will collapse.
Some great ideas from Keith, this must be a legislation change. The discussion around the possible issues within the DB market dwarf the issues within the SIPP market.
The SIPP court cases due this month could add £100M+ onto the FSCS levy. The worry is that the claims management companies are the biggest bidders for these companies.
A full review of the FSCS levy is required.
The only fair way, is to equitable fund the FSCS and ditch the need for PI, Keith’ suggestions only go part way there with a centralized fund, but we would still have to get PI.
All three seem to dodge the fact that these levies as with any cost gets passed on to the client, the charges I make on my clients pays for all my business costs, if these costs increase by way of adhoc levies then so do my charges !
Its fair to say now if you do or have done any kind of business that is viewed as higher risk then your PI cost is going to reflect that, irrespective of your absence of complaints, business model and systems, which means there is a real business argument to de-risk and greatly reduce costs on your business as much as possible and only deal in vanilla, this cant be good for the industry moving forward ?
The FCA have all the data it needs to pass on to the FSCS which could determine the cost for equitable funding, turnover, complaints, risk, product types. The FOS (with some major changes) are more than capable to handle the complaints and make a informed ruling.
The big plus point for us and our clients is… there would be no exclusions no hidden clause’s, no Cap Ad, if a claim is made and upheld then the money is paid out, and our clients are not paying twice for protection (PI and the FSCS)
Forget the cap ad limit, its a waste of time and waste of resource anyway, lets face it any person or company who knows the ~~~~ is about to hit the fan is going to strip out all the assets its got and fold !
The problem isn’t the FSCS, it’s the FCA’s perennial FAILURE to prevent the endless tanker loads of uninsured liabilities passing to it. Were it to practise regulation “in a proportionate and appropriately targeted manner”, as the Statutory Code of Practice for Regulates states quite clearly that it’s supposed to, this crisis would be vastly smaller in scale.
When, for example, is the FCA going to make any effort to examine the GABRIEL returns or install a software mod to flag up automatically any data pertaining to the use of unregulated or offshore investments?
When is it going to insist that all firms must hold comprehensive PII cover relevant to all areas of activity?
When, for heaven’s sake, is it going to start doing its job properly and honour its claims to “secure an appropriate degree of protection for consumers” and to “protect and enhance the integrity of the UK financial system”?
The fact that it so dismally FAILS to fulfil these objectives surely lends weight to the recent calls from a cross-party committee of MP’s for Andrew Bailey to resign and make way for someone determined to do a better job.
When is Parliament going to grant the TSC the powers it so obviously needs and wants to force the FCA to prioritise how it allocates its resources? So far, all we’ve seen is a bit of intervention from the Treasury, but it’s hardly made any meaningful difference, has it, as demonstrated by the latest train wreck, namely LC&F.