Garry Heath: The hidden nasties contained within FCA’s advice market review


The Financial Advice Market Review was a real “so what?” experience. A bit like arriving for dinner having missed lunch to find the restaurant only does nouvelle cuisine.

There may be some benefit in some of its ideas. However, hidden away are some potential nasties.

The review of Financial Services Compensation Scheme funding must be welcome but it needs to ensure all potential recipients pay for the cover.

Currently, we have six million adviser clients paying for a potential claim base of 16 million. Risk-based levies may seem initially attractive but they have the potential to be hugely bureaucratic. The FSCS can only be solved by a levy.

More worrying is the suggestion professional indemnity insurance needs to be revisited. Here we have the potential for huge damage.

Normally, PI insurance would be perfectly adequate but thanks to the eccentric nature of  Financial Ombudsman Service decisions, PI insurers have been reducing cover and bailing out of some advice areas completely. PI cover is an adviser’s substitute for capital adequacy. Across Europe, banks regularly use capital adequacy to cull advisers. It will happen here.

The FAMR was an exercise in detail but we need a review of the whole regime. We will only get that if advisers unite and campaign for it. Too many are enjoying an Indian summer, which they presume will last until they retire.

It will not and in the meantime advisers are terribly exposed to the lobbying of powerful interests.

Garry Heath is director general at Libertatem