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