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FSCS chief: We must do better on investment advice claims

Financial Services Compensation Scheme chief executive Mark Neale has admitted that the organisation must do more to quickly establish whether intermediated investment losses have been caused by bad advice.

In his latest monthly blog, published in December, Neale says the FSCS continues to be challenged by the complexity of many failures in the investment intermediation sector, of which he says life settlement firm Catalyst is the latest.

Neale says: “In order to compensate, the FSCS must establish that a failed business had a liability to the investors advised by an intermediary. 

“But it is often far from straightforward establishing whether an investor’s losses were caused by bad advice or by some other factor – fraud, for example – which the IFA could not readily have foreseen.

“And even once a liability has been established, it can be difficult to quantify the loss where the underlying investment was in an illiquid fund.”

He adds: “These are not excuses. We need to be better at anticipating these issues and addressing them earlier.”

Advisers have hit out at the recent FSCS announcement that a £29.5m interim levy is to be imposed on investment advisers following the failures of Catalyst and stockbroker Fyshe Horton Finney. This is in addition to a £78m annual levy on investment advisers for 2013/14.

Investment Quorum chief executive Lee Robertson says: “It is good to see Mark Neale recognising that situations are not always clear cut, rather than automatically putting the blame on advisers, as has sometimes been the case in the past. But making progress will be difficult due to the complex nature of some products.”


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  1. MIssold Investor 9th January 2014 at 4:13 pm

    There are two issues mixed up in this piece. One is about establishing responsibility for specific investor losses. Advice cases are individual by nature, and it is not good enough for FSCS to generalise in the way they tried to do with Keydata. The other issue is about the FSCS funding model that categorises some product providers as being in the same class as IFAs. Mark Neale is surely right about FSCS struggling with complexity. The problem is, there is no effective appeals process when FSCS gets it wrong.

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