IFAs have hit out at the Financial Services Compensation Scheme’s decision to force IFAs to foot the bill for failed stockbroker Wills & Co.
Last week, the FSCS confirmed that the cost of Wills & Co’s failure will fall on the intermediary sub-class.
The FSCS has already awarded £650,000 in compensation for 80 claims against the company and there are a further 1,320 claims still being processed.
The FSA stopped Wills & Co giving investment advice in February and the FSCS declared the company in default in July.
An FSCS spokeswoman says: “The FSCS always considers carefully to which funding class compensation costs arising from, or expected to
arise from, claims in respect of a firm in default should be allocated.”
Churchouse Financial Planning director Keith Churchouse rejects the concept of pursuing IFAs for compensation claims against a stockbroker.
He says: “This is an unacceptable situation. Maybe the FSCS is going down the path of least resistance. Why can’t they go to stockbrokers to pay for it? I really do not see why they refuse to do it that way.”
Jamieson Financial Management principal Bruce Jamieson says banks should be forced to pay the compensation costs for failed stockbrokers, not IFAs.
He says: “I think IFAs and stockbrokers should be placed in different sub-classes. I am very angry. It is appalling that we should have to bail out stockbrokers.
“After all, the majority of stockbrokers are no longer partnerships but are owned by the banks, so the banks should meet the compensation costs, not us.”
Hudson Green & Associates principal Ian Hudson says IFAs have been unfairly targeted following a number of defaults. He says: “This is unfair and I think we were also treated unfairly with the Keydata situation. It would appear that any opportunity to hit the intermediary market has been taken and when it is hit, it is hit hard. I am not sure that is entirely appropriate.”
The Financial Management Group director Alister Mellor adds: “IFAs are continuously saddled with other people’s mistakes and errors and I do not agree with it at all. If IFA firms are under pressure financially, then any extra fees the FSCS lumps on them can cause them to have to close their doors.”