Tenet chief executive Simon Hudson has supported the FSA’s proposals to raise advisers’ capital adequacy requirements, saying too many firms are in position where they can be wiped out by just one or two complaints.
Speaking at the Money Marketing Live panel debate on the retail distribution review, Hudson also questioned whether personal assets should be used to make up the current £10,000 minimum.
Hudson said: “If £10,000 is the limit and that can include personal assets such as your house, no judge in the world is going to throw out your wife and kids of their home to get their hands on that money.
“If it was put up to £30,000, £40,000 or £50,000 in cash that had some form of bank guarantee or protected certificate on it, that would stop it falling to the Financial Services Compensation Scheme.”
He said many firms spend all their provision for complaints before they slip into default but this money should be ringfenced. He said this would provide better consumer protection and prevent other adviser firms having to pick up the costs through increased FSCS levies.
He said: “If a company gets into trouble, chances are it has already spent its piggy bank, which means it falls to the FSCS and the rest of us have to put our hands in our piggy banks to pay for it.
“Everyone should have some provision for complaints, whether it is in the form of professional indemnity or through a bank agreed loan. You do not want to find yourself in a position where just one or two complaints could wipe you out.”