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FSCS Keydata rebate goes to fund managers ahead of IFAs

The Financial Services Compensation Scheme has announced that any recoveries relating to Keydata compensation will first go to investment fund managers rather than advisers.

The FSCS has decided to refund fund managers ahead of IFAs in order to repay the cross-subsidy triggered by the £326m interim levy, mainly to cover the costs relating to Keydata unit Lifemark, announced in January.

Advisers have had to pay a £93m interim levy towards these costs.

It follows the news that Norwich & Peterborough Building Society is to repay the FSCS for payments the scheme has already made to N&P customers who invested in Keydata products.

N&P has set aside £57m to repay customers who invested in Keydata products through the society, including the payments the FSCS has already made.

The FSCS has also announced that the FSCS annual levy for 2011/12 is lower than previously estimated, as tipped this morning by Money Marketing.

The total levy for 2011/12 has gone down from the indicative £240m levy bill  announced in February to £217m.

Investment intermediaries will now face an annual FSCS levy for 2011/12 of  £34m compared to the £40m estimated in February, and up from £20.3m the previous year.

But the levy for life and pensions intermediaries has increased from £10.5m to £21.5m,  to reflect the reallocation of compensation costs based on updated analysis of claims paid to date.

The FSCS says the life and pensions intermediary levy has risen as it expects claims relating to mortgage endowments and pensions to continue.

Analysis of claims paid to date in 2010/11 shows that a greater proportion of claims came from life and pensions intermediation activities rather than investment intermediaries than in previous years.

FSCS chairman David Hall says: “There is no one right answer to the funding issues raised by Keydata. The costs of failure must be pooled across the industry if the FSCS is to meet its obligations to consumers, and those costs can in turn be redistributed, but not reduced or avoided.

“The FSCS and the FSA recognise however the importance of taking into account the widest range of industry views and settling a future approach to funding which commands the widest possible support.”

Hall adds that the review of the FSCS funding model will take place as soon as European legislation sets out whether the current ’pay as you go’ levy system can continue, or whether a pre-funded model will have to be adopted instead.

The FSA has timetabled the FSCS funding review for Q3/Q4 this year.


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There are 26 comments at the moment, we would love to hear your opinion too.

  1. Pissed Off IFA 6th April 2011 at 1:01 pm

    Is there any hope left for the small IFA? We are just canon folder. It is quite obvious why IFAs are not being sent knives but this sort of thing would make us slit our wrists.

  2. I think that large investment houses are far more in need of this rebate than the small to medium businesses of most IFAs.

    It makes me feel warm inside that we’re looking after the most deserving in the population – the wealthy.

    Quis custodiet ipsos custodes?

  3. Andrew Harwood 6th April 2011 at 1:07 pm

    Ultimately responsibility for advisers and fund managers breaching the rules of the FSA is down to the regulator so if the industry is responsible for the funding of such failing companies/firms then the industry should be responsible also for compliance.

    It is a travesty of justice for good honest advisers, who have no control over regulation, to be expected to bail out the public who choose to invest through such rogue companies. Why should the Public not at least share some of the costs also as they must share responsibility through caveate emptor (Let the Buyer Beware)

  4. You couldn`t make it up could you?

  5. Well what do you know? Let’s keep a few sweet at the top and let the FSCS pour even more onto the IFA community. To cross subsidise in this way is most probably illegal and the FSCS should be taken to task but they know the IFA community does not have one strong voice whereas the fund managers could easily take action. Once again those legislating our profession and those regulating and sitting in judgement of it get it wrong; the IFA picks up the cost of their mistakes; and the good old IFA is left out in the cold. FSCS if you were physically able I would say hang your heads, but the smell coming from the lining of your own pockets probably prevents it!!

  6. Like the proverbial school bully, they lie awake in bed at night,thinking up yet more ways to make the lives of IFAs a misery.
    If they can kick us in the teeth they will.
    The whole system is rotten to the core.
    No doubt an fscs spokesman will come out and say how this is only fair, blah de blah de blah.
    As though we were fairly charged in the first place.
    Perhaps they could make a new advert publishing how they rob small business’s in order to make everyone else happy.

  7. Predictable responses so far, but how many of you would be criticising this fair policy if the situation was reversed? (please setting aside the specifics of Keydata)

    i.e. if another sector had made its maximum contribution and then IFAs had had to cross-subsidise – you’d be the first to want your money back.

  8. Salt in the wounds 6th April 2011 at 1:26 pm

    So a product provider who turns out to be an intermediary goes bust and all the other intermediaries have to cough up to the FSCS. One intermediary who sold that other ‘ intermediaries’ prducts then pays a whacking compensation refund to the FSCS but this isn’t used to rebate the costs paid by the other intermediaries but instead the product providers will benefit although it wasn’t they who were hit first of all as the collapsed product provider wasn’t a product provider it turned out but was an intermediary.

    Makes sense to me!

  9. Salt in the wounds 6th April 2011 at 1:28 pm

    To Anonymous at 1.21pm.

    You are right ‘generally’ but the whole point is the specifics regarding KeyData!!!!!!!!

  10. At least some money is coming back and that may feed it’s way into lower charging by fund managers which in turn leads to cheaper products, ergo more margin for adviser charging. – well you can dream, nothing else left….

  11. You won’t get the FSCS or FSA to hang their heads in shame – they simply don’t care.

    However people like Steven Gay (AIFA), Edward Grant (PFS) and the heads of large networks should resign on the grounds of being totally ineffective.

    When it comes to respresenting the people that elect and support them – when it comes to the crunch – they are about as much use as an ashtray on a motorbike.

  12. Anonymous @ 1:14

    (please setting aside the specifics of Keydata)

    It is not possible to do so. That is presicely where the unfairness begins.
    I take it you are not an adviser, more likely an officianado who thinks his decisions are always the right ones.

  13. I have sat here for the past 10 mins trying to put words to my thoughts, but they fail me !!

    Really what do we have to do to get some justice here ?

    Agree with Steve Webb AIFA/PFS what a waste of time Gay and Grant are.

  14. Whilst I understand the feelings expressed above, this decision is right. Unfortunately the original decision to classify Keydata as an intermediary is completely wrong and that is why everyone believes the whole system is rotten to the core.

    IF Keydata had been an IFA and it’s claims had caused the FSCS to go to fund managers to bail out the IFA sector then it would be fair that the fund managers got repaid first.

    Keydata wasn’t an IFA though.

  15. What is wrong here is the fact that hector pants and his cronies have statutory immunity from accepting any wrongdoing on their part, in wrongly classifying keydata as an ifa.
    The longer this lot are allowed to carry on, the more it will cost us.
    If the government continue to allow them free reign, it will not be too long before they make such a huge error no amount of levying will fix it.
    What lies will they fabricate when that happens?

  16. John Blackmore 6th April 2011 at 2:57 pm

    “The FSCS has also announced that the FSCS annual levy for 2011/12 is lower than previously estimated”

    Good news. Well good news that is until they decide that another failed provider is to be misclassified as an adviser.

    How anyone at the FSA or FSCS can sleep at night is beyond me. Have they no self respect ?

  17. Its like Punch and Judy.
    Pleased as Punch, pupet with a big club.

    Mr. Punch (FSA & FSAC scheme) and his wife, Judy(IFAs).

    The performance consists of a sequence of short scenes, each depicting an interaction between two characters, most typically the anarchic Punch(FSA) and one other character.(IFA)

    The show is performed by a single puppeteer inside the booth, known as “Professor or”Hector S)
    and assisted sometimes by a “Bottler”(Banks), who corrals the audience outside the booth, introduces the performance and collects the money (“the bottle”).

    Today, the audience is also encouraged to participate, calling out compensation compensation to the characters on the stage to warn them of danger.

  18. what is the difference between a missold investment and a missclassified provider?

  19. However painful it may appear, this is correct, fair and sensible. People should think before engaging keyboard.

  20. Sam
    we might be able to see it as fair and reasonable if keydata had been correctly classified in the first place.
    What would happen to you if your client was a moderate risk and you put their investment in a high risk category?
    IFas are again, the bottom of the heap that is what is making them so angry.

  21. But how angry are you? Enough to do something about it or just to complain. I am astonished that IFAs are not taking to the streets – or are you now some disheartened that you are just making the best of it?

  22. I am ready to take to the streets Gary,and if adviseralliance organises it I will be there.

  23. I find it hard to believe that there are people actually supporting FSCS!
    The FSCS, like the FSA are devoid of any morals. I’m with Garry, lets take to the streets

  24. Hard to believe but this Tory Government seems even worse than the Labour one when it comes to killing small businesses. At least we expected Brown and Co. to knife us in the back but this lot are smiling as they steal our pensions and then asking us to pay for their regulatory failures.

    What is the point of passing yet more exams and re-qualifying if they keep retrosprectively changing the contracts we sold to rob us of a renewal stream which we built up and destroy any value to our business?
    When it comes to morals and ethics the FSA and these Tories make Silvio Berlusconi look like Mother Theresa. They are scum.

  25. Norwich & Peterborough member 7th April 2011 at 12:21 pm

    Spare a thought for us poor sods who are also customers of N&P. We receive no interest on current accounts anymore and are being charged £5 just to use an authorised overdraft and the pot is now to be further reduced by £57m. I cannot even afford the luxury of investing in dodgy products!

  26. Come on Gary. You spoke for us before. Organise a protest at Canary Wharf. We will be there. AIFA, the Networks are useless. They’ve given it all away! We need a rallying voice to make us heard.

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