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Investment advisers face £76m FSCS levy for 2013/14

Mark Neale
FSCS chief executive Mark Neale

Investment advisers are facing a £76m Financial Services Compensation Scheme levy for 2013/14, plus an interim levy of £25m for 2012/13.

In its plan and budget for 2013/14, published last week, the FSCS provided indicative figures about claim assumptions and levy estimates for the next financial year. The total FSCS levy bill for 2013/14 is likely to reach £311m, up 17 per cent from £265m in 2012/13.

The FSCS is forecasting an interim levy of £25m for investment advisers based on higher than expected compensation costs relating to Pritchard Stockbrokers and spreadbetting firm Worldspreads. It first signalled an interim levy was likely for the investment intermediation class in November.

The FSCS will confirm the final amount of any interim levy before the end of March, and will issue invoices to firms around the same time.

Investment advisers’ estimated FSCS levy costs for next year are down 3 per cent from £78m for 2012/13.

The life and pensions adviser sub-class has seen a more significant 63 per cent reduction in their annual FSCS levy, from £46m to £17m.

The FSCS is not expecting any claims against fund managers for 2013/14. But the FSCS announced last month fund managers are being hit with a new £31m levy following recalculation of the £326m interim industry levy for 2010/11. Investment advisers are contributing £300,000.

Claims are also not expected in the life and pensions provision and home finance provision classes over the next financial year.

The FSCS’s latest claims estimate for 2012/13 relating to MF Global UK, Worldspreads, Pritchard and other stockbrokers and structured firms has risen 11 per cent from 12,072 as at February 2012 to 13,410. But it estimates this will fall 86 per cent next year to 1,837.

Arch cru claims estimates for 2012/13 have gone up 15 per cent from 1,357 to 1,556, which are set to fall 23 per cent to 1,200 next year. Arch cru claims are typically split 20:80 between life and pensions advisers and investment advisers.

Hargreaves Lansdown founder Peter Hargreaves hit out at the FSCS last week calling it “completely incompetent and daft”, and “a dustbin for the regulator’s inadequacies”. The company saw its FSCS bill rise 140 per cent to £1.2m for the second half of 2012, compared to £516,000 for the same period in 2011.

Apfa policy director Chris Hannant says: “Despite falling, the levy is still far too high for an industry buffeted by difficult economic conditions and the costs of the RDR. Advisers are struggling under the high costs of regulation and cannot absorb them indefinitely.”

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