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Mortgage brokers’ call for FSCS reform gains momentum


Nearly nine in 10 mortgage professionals believe the Financial Services Compensation Scheme needs reform.

A poll of 122 Money Marketing sister publication Mortgage Strategy readers shows 88 per cent believe it is time for a change to the way brokerages are levied.

The poll comes after broker anger that they are having to “pick up the bill for miscreants” in the life and pensions sector.

Presently, the FCA and the Financial Ombudsman Service categorise term assurance and critical illness as “non-investment protection policies”. However, the FSCS classifies them as life and pensions business. This means brokers are having to pay for things such as poor pensions advice, even though they do not offer advice in such areas.

Moreover, the FSCS levy trebled from £33m in 2014/15 to £100m in 2015/16, which the compensation scheme says is largely due to a rise in claims for missold Sipps and, therefore, the extra fees will fund the redress for these.

Last week, London & Country director Pat Bunton said his firm’s levy totalled more than £250,000 this year, of which 73 per cent related to life and pensions.

The FCA is set to consult on the FSCS’s funding model next year. Both Bunton and Association of Mortgage Intermediaries chief executive Robert Sinclair propose a “very small” product levy that would go towards funding the compensation scheme.

Your Mortgage Decisions director Dominik Lipnicki says: “With FCA fees and everything else, it all goes one way – only up. It seems unfair to me that you have to pay for a risk that you do not pose. You are effectively subsidising problems in another sector.”

London Money director Martin Stewart, who also offers a small number of clients life and pensions advice, says: “Ultimately, who is going to pay? The client is going to pay.

“If my fees go up by £300 a month, I will put my broker fee up by £100. It is a self-defeating stick they keep hitting us with. The whole thing needs reform.”



Brokers back FSCS reform over pensions misselling concerns

Brokers are calling for urgent reform of the FSCS levy as they feel they are unfairly paying to “pick up the bill of miscreants” in the life and pensions sector. Presently, the FCA and the Financial Ombudsman Service categorise term assurance and critical illness as “non-investment protection policies”. However, the FSCS classifies them as life […]

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Paul Lewis: Unfair FSCS levy punishes honest advisers

I got a tweet from a financial adviser last month. “Why has my levy for the Financial Services Compensation Scheme gone up 529 per cent?” he asked. Others joined in: “up £2,000,” said one. “Pretty much tripled,” said another. And so on. Readers of Money Marketing will know this year’s significantly higher levy is causing […]


Sipp firms under pressure to raise fees as FSCS levies soar

Sipp customers may have to pay higher fees as providers see the cost of complying with regulation soar 75 per cent this year. Legal & General-owned Sipp firm Suffolk Life warns total regulatory costs have jumped 75 per cent, driven by the increased Financial Services Compensation Scheme levy which it says could be as as […]


FSCS payouts against investment advisers soar to £183m

The level of compensation paid in relation to investment advisers who have gone out of business has jumped a massive 156 per cent to £183.1m in 2014/15. In its annual report, published today, the FSCS revealed compensation payouts against investment advisers in default has risen from £71.3m in 2013/14. Payouts against life and pension advisers […]


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. A complete overhaul of the entire system is massively overdue. Surely even ministers can see that this creaking behemoth of cost can stumble on no longer

  2. Could be a can of worms if the industry were to legally challenge the legitimacy of the government taking fines from the financial services regulatory body, especially when they should clearly be used to compensate those members of the public who have been financially affected by the sector, first and foremost. Conseqentlyl what happens is that the clients of good firms end up paying for something that is not their problem, through increased fees. Just keep telling it as it is to clients, like I do… Transparency works both ways!

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