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FSCS levies advisers £100m and warns of more to come

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The Financial Services Compensation Scheme will levy life and pensions advisers £100m for 2017/18 and has warned firms to brace themselves for a further levy later in the year.

In its latest Outlook update, published today, the FSCS says it has reduced its expectations of costs for Sipp-related claims, bringing down its forecast from £163m in January to £146m. The average forecast claim value has fallen from £36,000 to £32,000.

FSCS chief executive Mark Neale says: “In view of the volatility of these claims, we plan to raise an initial levy to the limit of £100m.

“This means that we begin the year with the risk of a supplementary levy later in the year which, if it became necessary, would result in costs falling on other sectors through the retail pool.”

Investment advisers will pay a levy of £88m, up £4m from the estimate in January.

Overall the FSCS will raise £363m through industry levies, an 8 per cent increase from 2016/17.

Neale adds: “As we saw in 2016/17, when we were obliged to raise three supplementary levies but were also able to make a substantial return of funds to investment advisers, much can happen during the year for better or worse. We do not have 20/20 vision.”

He says the levy numbers have been published against the backdrop of the FCA’s ongoing review into FSCS funding.

He says: “Those issues are not simply about how to share FSCS’s costs fairly across the industry, important though that is. The paper considers the interaction between FSCS protection and firms’ own professional indemnity insurance cover, so that FSCS is the last, not first, resort. And it considers the scope of FSCS protection and the limits on compensation, including for retirement savings, where currently different limits can apply.

“I strongly encourage all those with an interest in these issues to continue to engage with this review.”

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Comments

There are 22 comments at the moment, we would love to hear your opinion too.

  1. FSCS chief executive Mark Neale, how can you, still have the nerve to class life and pensions advisers together, how can Life advisers be liable for Pension/SIPP miss-selling!
    Morally wrong, I would go as far to say as possible Legally Wrong!

  2. I would totally agree with Steve,we are treated as cash cows by them and they need to differentiate between life only and life and pension advisors

  3. I reported a clear SASS fraud late last year. From the cold call – to the SASS – to the overseas property. I traced it all.

    They didn’t give one jot – ill be paying for the scam no doubt soon enough. Keeps them in a job.

  4. Steve is correct. This outrageous penalty system would never be allowed in other industries.

    Imagine Parliament suggesting such a levy on parliamentarians?

    The FCA is complicit in allowing this strong-arming of the adviser community. How about it treating its own customers – us – fairly?

  5. Darren Turnbull 12th April 2017 at 10:09 am

    The whole system is morally and ethically wrong – the FSCS is a joke – no other industry would allow the good to pay for the bad – every year this turns my stomach and makes me question why we continue. We are a chartered firms with no complaints in 17 years yet our FSCS and FCA fees soared to nearly £15k when used to be £3/4K. The FCA and FSCS need a complete overhaul as they continue to fail in their duties and we pay the consequences – why a product based levy hasn’t been introduced immediately two years ago is beyond me.

    • Darren I share your pain. We are a Chatereed firm too with an unblemished complaints history and we have experienced massive increases in FSCS levies. Makes me sick to the stomach. I hope you have submitted a response to the FSCS consultation like we have.

  6. At the age of 67 (retired from investment at 62) why am I being charged as if I still provide products with an inherent risk such as pensions and investment. I just do a couple of mortgages a month and associated protection products to keep me eye in…..totally unfair.. Love someone with the balls to take this to the legal system for clarification..

  7. On top of a 12% increase to my PI policy this year

    I wouldnt mind, but I havent had any complaints let alone upheld, no crap business on my books, on asking my insurer they just said its just the market.
    Good business and good consumers (our clients) just have to carry the can for the bad

    Just of the top of my head this could mean (taking into account what the adhoc levy will be later in the year) 7.5% increase in my fees for this year !!! that will knock a hole in the expected returns for my clients !

  8. The whole system is without a thorough audit trail. They don’t care since its not their money they are shelling out! Levies on levies where is this going to end!

  9. Over to you, APFA

  10. robert milligan 12th April 2017 at 11:10 am

    Chris,,,Just Look at Mr Keith Poppelewell this week news!!! They do Act I can assure you!!

    • you say they act, however not very quickly, tpo had its permissions stopped over 4 years ago, were reported 2 year previous to that, so 6 years to get a result, and 2 years of people being scammed before they did anything.

  11. Firstly I think the nomenclature being used is misleading and maybe even wrong. It should be classified as retail financial advisers. Those restricting themselves to only life assurance or only pensions are not only muddying the waters they are not really entitled to call themselves financial advisers. Financial advice is an holistic discipline. (I guess that will elicit howls!)

    However that doesn’t take away from the fact that the current system as operated my the FSCS is an absolutely ridiculous way of going about compensating those who have been mistreated. It is – as we all know – the good guys paying for the rogues or the inept.

    Mr Neale has always been mealy mouthed about a product levy. But when you consider that the Government regards policy holders as a cash cow, having now increased IPT to 10%, I cannot understand the reluctance for instituting a product levy.

    Looking at the problem from the other end of the telescope, it is also a failure of regulation on two counts. Firstly with all the reporting, why doesn’t the Regulator spot these nascent problems in the first place? Secondly as a surety why not have a system of personal guarantees so that the owners and directors become personally liable in the event of insolvency while claims are an issue. Indeed non-incorporated traders are already in this position and it does help to concentrate the mind! It would put business owners in a similar position to the old Lloyds names and I think it would certainly cut down the instances of individuals hiding behind incorporation to dump their liabilities on the rest of the industry.

  12. Advisers have been screaming about the SIPP to unregulated fraudsters and scams for years, yet little if anything has been done to stop them. The reason why is simple, they make the advisers pay for regulations inability to act or take responsibility for the consumers loss.

    If I transacted an investment there is no legal means for me to prevent that client moving their investment in the future, but I will still be held accountable at any time in the future. This is a complete joke. Once a client moves that servicing or investment, my liability should end if not recommended by me.

    These action by the FOS and FSCS are frankly worse then the fraudsters, as at least they know what they are doing is illegal.

    What really gets my goat is we are then told we charge to much for advice.

  13. I would like to ask just how robustly the FSCS investigate claims made to it by complainants?
    Do they just ‘roll over’ and pay the compensation to every and any claim, meritless, or otherwise, or is every claim thoroughly investigated?
    After all, once a firm is unable to meet its liabilities and goes into default, all of its records are probably no longer available,
    Thus, the FSCS are unlikely to be able to secure the evidence they need to robustly deny liability.
    Can we ask to see how many claims are denied and how many are admitted by the FSCS via a Freedom of Information request?
    Come on MM, here is an opportunity for you to get to the answer to these very pertinent and relevant questions, and then tell us the outcome ASAP.

  14. This figure is not coming down and let’s face it never will and we know the reasons why (some are even stated above); so our clients’ will continue to bear the brunt of the burden of the increasing fees until their own pips squeak, whilst product providers sit back and languish in the business that is ‘gifted’ to them from our ‘community’, without liability and without paying for it.

    Fair? who said anything about fair; it’s just how we roll, lots of jaw but no teeth, much as it pains me to say.

  15. I reported a firm who were flogging SIPPs and UCIS investments to the FCA and they did take action and did so very quickly as well. The firm are thankfully no longer trading and polluting the system because the FCA shut them down! All I can say from my experience is that the FCA whistleblowing team were very interested in my information and did take action. My advice if you see or hear something that isn’t right from a regulated firm… report it to the FCA. They can’t be everywhere and can only act if the advisory community supports them with information.

  16. robert milligan 12th April 2017 at 2:28 pm

    I know its putting my head on the Block, But I reported to the FCA in early July 2012 about the TPO, with a complete case file of initial interview with the unregulated introducer, after sitting in on the meeting with my Client, I took all the paperwork off him and gave it by email to the FCA, So it only took until May 13 to have the firm removed, not bad considering the Right to appeal!!!

  17. And what happens if a few big Sipp providers go under or the scam DB transfers the bills we currently pay could just be the tip of the iceberg!

  18. To be fair to Mr Neale, he didn’t (as far as I’m aware) devise the method by which the FSCS is funded, i.e. who has to pay what, and nor does he have any influence over what liabilities it takes on. Those are down to the FCA which, as a result of regulatory negligence, is largely responsible for the boatloads of uninsured liabilities falling on the FSCS. All these discussions about a new funding model are just an attempt to distract attention from the FCA’s own failings.

  19. Julian, you are probably right in your assumptions above, but Mr Neale is the current Captain of the FSCS Ship, that has been for some time robbing and pillaging from the innocent Adviser, this surely cannot be allowed to carry on, as a contributor to this article, I just hope he reads the messages posted hear and cascades our feelings to whoever he reports back to in the FCA.

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