The FCA may not have taken enough stringent analysis to determine why its incoming £240m levy for the pension and investment intermediation class is necessary, says Pimfa.
The levy – set to cost advisers £175m – is part of £516m in levies predicted to hit the sector in the 2019/20 financial year.
Pimfa says the levy will upset advice business profits and forecasts just eight weeks out from the end of the financial year.
There also limited evidence to suggest the FCA is proactively seeking a way to mitigate claims against bad advice, it says.
Pimfa director of regulation Ian Cornwall says: “Urgent work needs to be done to prevent failure of firms that leads to calls on the FSCS. The levy is a major burden cost on all firms large and small and is considered by firms to be a cost of regulation – the current levy of levies is unacceptable and not sustainable.”
Outgoing FSCS chief executive Mark Neale said on Wednesday that the lifeboat fund was struggling to keep pay outs rolling in line with expectations.
Companies which fail to provide specific information to the FSCS continue to compromise its abilities to gather data to process claims, he added.
Cornwall says Pimfa remains against the watchdog’s stagnant approach to weeding out bad apples in the industry.
“The FCA’s approach must be more proactive in quickly taking action to address the root causes of the claims that result in these unsustainable levy increases.”