It is encouraging to see the FSA taking on board the views of Arch cru investors in its revised redress plans but questions remain about the validity of the first scheme of its kind.
The regulator has amended its proposals with investors now having to opt in to the scheme to assess whether the advice was suitable.
It estimates just 15 to 30 per cent of Arch cru clients will opt in, reducing payouts to between £20m and £40m, compared to original estimates of £110m.
This assumption is based on investor sentiment with around 400 writing to the FSA to say they did not want their adviser to be forced to pay them compensation.
If correct, this would reduce the effect of the redress scheme on the Financial Services Compensation Scheme – with an extra £7m falling on the FSCS, compared to the original estimates of £33m. Including claims already paid, this still leaves an overall FSCS Arch cru liability of £37m, higher than the £33m the fund range’s ACD Capita paid out as part of an earlier payment scheme.
Clients may not blame their adviser but if faced with the choice of potentially receiving more compensation or not, as everyone else appears untouchable, then some may reassess their view. It is therefore too early to predict whether the FSA is being too optimistic in its assumptions.
Although the regulator’s amended scheme may soften the blow for advisers involved, and the whole sector, it failed to make the case for “widespread” misselling needed to trigger a move of such significance.
Advisers have been left with the feeling that they are the easy targets of a regulator who, for whatever reason, did not have the appetite to battle those with bigger pockets.
Merry Christmas from MM
Rising regulatory costs, uncertain charging rules, RDR media-hype, perhaps a dose of the Norovirus. There is plenty to exercise the mind ahead of the biggest regulatory change of a generation. Wherever you are with your RDR planning and whatever your views on the new rules we hope you find some time to relax this festive season and spend time with those most important to you.
Merry Christmas and a Happy New Year from everyone at Money Marketing.