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.”