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FSCS: Advisers should tell clients about compensation scheme

Nearly two-thirds of clients had to proactively prompt their adviser for information about the Financial Services Compensation Scheme, a mystery shopping exercise has revealed.

In a series of studies commissioned by the lifeboat fund, it has found that awareness of the FSCS is likely to lead to less risky product choices and greater sales of regulated products covered by the scheme.

Advised clients are particularly likely to think the FSCS is important, but are also less likely to question the cost of that advice if they are aware of the FSCS’ protections.

However, only 23 per cent were aware of the compensation limit for pension claims, and 61 per cent discussed the scheme only when their client prompted them.

The FSCS has established a new working group from the industry to look at how information on the FSCS should be disclosed to consumers to see if a standardised format can be reached.

FSCS chief executive Mark Neale says: “It is clear that greater awareness of the protection that FSCS provides to retirees has an impact on product choice and on the risks they are prepared to take when planning their finances. It is key that providers and advisers make retirees aware of FSCS protection.”

In a sample of 1,500 over 50s surveyed by the FSCS, more than half used an IFA for a retirement product purchase, and 62 per cent said knowing about the FSCS would have influenced this decision.

The FSCS says its finding show telling people about the scheme acts as a prompt to consider paid-for advice.

FSCS chair Lawrence Churchill says: “The results of this research provide a clear indication of the need for firms to offer clear and accurate information about FSCS to their customers. This information will not only allow retirees to make more informed decisions about their pensions, but will increase their trust and confidence in the firms themselves. And that’s good for firms and for financial stability generally.”

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. I always tell clients about the FSCS, as it also helps to justify why they have to pay so much in fees!

  2. This sort of thing makes my blood boil. We pay for FSCS, we have it in our client agreement, it is included in every recomendation. Who exactly has been surveyed? The FSCS has been around in financial services terms since the ark. Or is it some quangolista justifying their latest ‘special project?’

  3. Surely this information is part of the terms of business and it is up to the FCA to make sure that firms comply.

  4. Do do these people live under a rock, do they not knowit is mandatory to put this information in your Terms of Business and your Suitability Letters

  5. If you put that in they will find something else to complain you have missed.

    The spiral will continue until the point where they decide to complain that you are bombarding them with TMI.

  6. Neil Liversidge 21st March 2018 at 5:10 pm

    My faith in Mark Neale’s stewardship of our money – please note – OUR MONEY – diminishes daily, and all the faster when I read that he has spent it on studies that amount to nothing more than a right pile of tripe. I have been in this profession 38 years, advising since 1985, with years spent advising other advisers. Whoever produced these conclusions has obviously never advised anyone and if they have then they must have done a very bad job of it. Every client IS told of the FSCS in our Client Agreement Document. What we need is a change to the system to stop chancers gaming the scheme. We’ve had more than one call over the years from would-be ‘clients’ asking us for a recommendation for a UCIS of their own choosing. Why? So they would have received regulated advice and would then be able to claim against us and/or the FSCS if, or more likely when, it went wrong. We’ve always refused and have never sold a single UCIS, but we still keep getting the bill for those who have, through our now wholly disproportionate FSCS contribution. Wake up Mr Neale, the chancers have worked out how to game the system. If you really want people to make less risky product choices the answer is staring you in the face. I’ve been voicing it for years: Let unregulated mean no FSCS cover, regardless of who recommended it, and make it mandatory for UCIS recommendations to be routed via the client’s solicitor who would have the job of checking all the relevant risk warnings were given. Obviously, I do realise that for you to get on board and support such a position might impair your popularity among consumerists and might stymie your move in due course to another lucrative quango-job, but hey – you’d be doing something right for a change. Also, if you did go for my scheme I’m sure the Law Society would love you, so you could go work for them!

    • Robert Milligan 22nd March 2018 at 11:35 am

      You are so right,,,we could sort out the FSCS by stipulating Only Regulated Advice on Regulated Products get both FSA & FSCS protection, why is it not that simple. What we need is a comprehensive warning for Non Regulated Products, signed by the client and adviser, Then we “Would See” clients getting what they believed they thought they were getting.

  7. If nothing else this proves to me that those in charge of protecting (apparently) the public do not have a clue what they are talking about. If this guy doesn’t even know what we are all required to put in print, details of the FSCS then Mr Neale really does not deserve to be in the privileged position he has.

  8. I’ll bet that greater awareness of the protection that FSCS provides to retirees has an impact on product choice and on the risks they are prepared to take when planning their finances ~ because they’ll realise that if they make the wrong choice, somebody else will pay to cover their losses.

    That aside, advised clients aren’t supposed to make product choices. We’re supposed to tell them what’s the best thing to do.

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