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FCA: FSCS review to target advice costs

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The FCA has pledged to put advice costs at the centre of its forthcoming review of the Financial Services Compensation Scheme.

Investment advisers will contribute £116m towards the 2015/16 FSCS levy, while life and pensions advisers will pay £100m. The total levy has been set at £319m.

Addressing the Treasury committee yesterday, FCA chairman John Griffith-Jones admitted the regulator needs to pay more attention to the impact FSCS levies have on advisers when it analyses the structure of the scheme’s funding.

A reassessment of the FSCS will take place after the Financial Advice Market Review, he said.

“When we do our review of the FSCS I think we will need to concentrate much more on the fairness of it amongst IFAs than perhaps was the case last time around, when the attention was on what happens if the banks can’t afford their bucket, rather than the IFAs.

“It needs to come after the FAMR work, but we need to concentrate a bit harder on the impact on the IFAs.”

Griffith-Jones also said recent increases in the regulator’s fees had been driven by recruitment to allow it to take on additional responsibilities in competition, payment systems and consumer credit.

On average, FCA fees increased 7.9 per cent in the last review.

However, Griffith-Jones admitted such rises are unsustainable.

He said: “Do I accept that we can’t go on increasing fees at 7.9 per cent? Clearly, because at some point the equation ceases to work.”

Acting FCA chief executive Tracey McDermott said the regulator is concerned about the “lumpy and unpredictable” nature of FSCS levies and pledged a fundamental review of the way the payments are structured.

She said: “[We will] look at the question of how that liability is paid for, because obviously you pay for the FSCS when you are paying for firms that have gone out of business having missold to their clients.

“So the good guys are paying for the problems caused by the bad guys, and we are going to look at that.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Before anyone gets their hopes up, McDermott also said “one of the things we have said we are looking at as part of the Financial Advice Market Review is whether there are ways of making (the FSCS) process predictable”

    They are clearly in the same mindset as they were in the previous review, which is that the actual size of the levies is less of an issue than the unpredictability of them. Breathtakingly blinkered thinking; if we go back a few years the 36 month funding model was supposed to smooth out the payments and reduce the need for interim levies(!)

    Mark Neale has repeatedly said that the funding of the FSCS is a zero sum game. The regulators have no intention of reducing the scope of FSCS claims and therefore the total overall levies, and are probably looking at a bit more rearranging of deckchairs to package as a “fairer” funding model.

    The only way forward is through the FAMR, rather than expecting the regulators to put together a better funding model on their own initiative.

  2. They’re going to have to come up with something or there won’t be anyone in this industry left. These fee hikes are way beyond acceptable but I’m not raising my hopes they’ll do anything at all as they’ve all got comfortable on the back of unaccountable percentage increases in fees and levies. We are now paying out for complaints where the products were deemed suitable by the regulator and also for products where no investment advice was ever given. This can’t go on as it is or something will go pop.

  3. It staggers me just how often they say that what they have been doing is clearly not fair and then carry on without a care in the world.

  4. It still makes me laugh that they (JGJ & T Mcd) focus on these fees and levies being borne on advisers, they are NOT, they are charged to the clients !!! we are the conduit, if you will

    Very clever PR, as they know, we wont get much sympathy.

    The sea would just be a big pond if it weren’t for the rivers that feed it, and the rain that feeds the rivers could be viewed as the clients.

    John/Tracey, face up to it, I don’t pay your costs and levies my clients do !! I just charge them more, because you charge me more

  5. I love this quote…

    ‘Griffith-Jones also said recent increases in the regulator’s fees had been driven by recruitment to allow it to take on additional responsibilities in competition, payment systems and consumer credit.’

    Either Griffith-Jones is stupid or he believes his audience to be. The FCA charges additional fees for all the items mentioned so Mr Griffith-Jones, for those of us that are not stupid, why have IFA fee increased?

  6. But Linda Woodhall has said…………

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