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Garry Heath: Combining PI and FSCS bills will not work


I have been expecting the last two declarations from the FCA since January. It dropped the banking culture review on instructions from on high. Banks are now off limits.

This leaves the regulator with a brace of issues. First, what does it do with the banking review team? And, secondly, how does it continue to justify the £600m empire when its biggest source of malfeasance is off limits?

In January the FCA sought the line of least resistance. Advisers do not have big lobbying friends and 95 per cent of directly authorised firms are not in a trade association. They are ripe to be demonised.

This sector has a £9bn turnover but refuses to pay even £5m to protect itself. A football team that claims not to be able to afford a goalkeeper. It is a joke.

Adviser charging is the obvious sequitur to RDR. If you can control how the client pays for advice, you can control how much. A regulatory regime that seeks to interfere in every detail will see this as a win; as will the ambulance chasers who will follow it.

The second declaration is on the dual issue of professional indemnity and Financial Service Compensation Scheme costs. Here, the regime is thwarted in its desires. The Financial Ombudsman Services wants to be the consumer’s fairy godmother, doling out claims outside the civil law. PI insurers want it to stick to the legal claims only. The FSCS realises it cannot continue to demand increasing funding from “innocent” advisers, so its answer is to combine its charges with PI’s.

Nonsense. One PI provider creates a monopoly market. “Risky” advisers will disappear and the survivors will pick up the bill for both higher levels of FOS and FSCS claims and higher PI charges.

Higher charges and decreasing income? The perfect storm.

Garry Heath is director general at Libertatem



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There are 4 comments at the moment, we would love to hear your opinion too.

  1. The huge increase in the volume of liabilities being taken on by the FSCS is largely attributable to firms which, due to regulatory negligence, have been allowed to get away with flogging toxic junk without adequate PII cover. These liabilities and therefore the costs (to the adviser community) of covering them are not going to go down, let alone go away, as a result of the FSCS assuming the role of a PII insurer as well as a lifeboat fund of last resort. How can they? It’ll just be rearranging the deckchairs on the Titanic.

    The first things that need to be done are for the FCA to admit its dismal failures to monitor just which firms are doing what (part of the “sorry history” to which Andrew Bailey referred shortly after taking office), redesign its GABRIEL Returns so that they ask the right questions instead of demanding loads of useless data and then to examine the answers to those questions with a view to identifying and homing in on potentially dangerous activities.

    Within its remit, the FSCS IS working. But it’s overloaded because the regulator hasn’t done its job properly.

  2. Maybe its the advisers who sold the junk to clients that haven’t done their job properly?

    Easy to blame someone else.

    • In the first instance yes, of course the root of the problem is the advisers who sold the junk. But every industry has its share of rogues/spivs/corner-cutters and cowboys. It’s the responsibility of the regulator to identify who they are and stop them doing it and, in this, the FCA has failed lamentably. Without actually citing any examples, Andrew Bailey has all but admitted this.

    • I agree Matthew, but remind us again who regulates said advisers ?

      Us good advisers can only do so much and we know those who may have blown the whistle have largely been ignored by the very people at the FCA WHO ARE THERE TO PROTECT !!!

      After all they are paid millions to provide protection then sit on their fat arse blaming every one else for their own failures

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