View more on these topics

Levy mettle

This may be unusual but I am going to start with some words of praise for the work of the FSA. It is to the regulator’s credit that it recognised that the burden of the Financial Services Compensation Scheme was threatening the long-term sustainability of the intermediary sector. I would like to commend the FSA and FSCS boards for their decision to review the funding of the compensation scheme and sticking to their guns under a certain degree of industry pressure.

Aifa was the lone voice pressing the case for change. We worked with the regulator, on behalf of our members, to create a better, more equitable system and are very pleased with the result. This shows the value of a well supported trade body.

The new funding arrangements for the FSCS are to be welcomed. Last year, firms in fee block A13, where most IFAs fall, paid around £1,290 per adviser to meet FSCS costs. Under the new structure, according to the FSA website, the levy for 2008/09 for a sole trader undertaking life and pension business could fall to £218. The exact amount will vary between firms but the vast majority will benefit enormously from this reform.

The rising FSCS levy had made it one of the biggest single regulatory costs for our profession. As evidenced by Oxera’s findings, IFAs paid a disproportionate share of the funding requirement and we had significant worries that it was becoming a barrier to entry and distorting market competition. It is worth noting that the FSA was not swayed by those bigger organisations that were acting to protect their balance sheets and failed to recognise the benefits of reform to consumers and the industry.

An efficient and sound compensation scheme is essential for consumer protection and to maintain confidence. It is right that the industry should fund the scheme, not consumers, but also that contributions from the market constituents reflect a proportionate and fair distribution of costs. The allocation of costs should relate to responsibilities, degree of involvement and financial benefits gained from any business area in respect of which claims are payable. The previous system created a disproportionate burden on certain sectors of the industry while allowing others to avoid their fair share of the costs.

This reform is a very positive result for IFA firms. We have proved that robust, continuous lobbying backed by value consumer-focused arguments will win the day.

Reform of the FSCS is just one of the positive changes that Aifa has effected in the past 12 months. The shift in the FSA’s thinking on the retail distribution review, in response to our work, and our recently published Manifesto for Advice show what can be achieved when the intermediary profession presents a united front to Government and the regulator. The next 12 months will be about us setting the agenda and not just responding to the initiatives of others.

The professional advice community should be reassured that Aifa can bring its influence to bear as a powerful voice for the industry.

We can achieve so much more if we stand together and speak with a single voice. With such pressing issues as treating customers fairly, stage two of the RDR and the current market turbulence, let us demonstrate our support for the profession and work together to provide a better future for consumers and advisers.

Chris Cummings is director general of Aifa

Recommended

Woolwich demands moreproof for fast-track business

Woolwich is tightening up its fast-track mortgage process after brokers voiced concerns that it could be abused by unscrupulous brokers.In an email to brokers, Woolwich says: “Being a responsible lender and treating customers fairly are key to our business.”It says applications on its MAX platform could result in requests to supply appropriate documents to verify […]

US banks may be set for mortgage retreat in UK

Network Data chief executive Richard Griffiths says there is a 50/50 chance that all US investment banks will with-draw their UK mortgage arms due to market conditions.Griffiths says the market should “watch this space” with regard to the remaining US investment banks in the UK mortgage market.He says: “I think if other players do go […]

Trouble ahead - thumbnail

Pensions: trouble ahead?

The pace of change in the pension’s space has been little short of astonishing, and has left thousands of employers struggling to keep their pension policy compliant, and also on the right side of current best practice and governance. Many employers, and indeed many in the pensions industry itself, would like to see a period of no change during the next term of government. This would give all sides a chance to catch up and draw breath. 

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com