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Regulator responds to ‘day of action’ FSCS campaign

Financial Conduct Authority chief executive designate Martin Wheatley says the regulator is keen to reduce the cost burden of the Financial Services Compensation Scheme, and believes advisers could help flag up potential areas of concern before they arise.

The comments were made as part of a letter sent to Informed Choice, which held a day of action campaign last month calling for a fairer FSCS funding model.

A total of 1,421 advisers signed the petition which called for better FSCS categorisation of firms and a greater awareness to be raised among consumers that the FSCS is funded by the industry, and that consumers ultimately pay the cost through charges.

A copy of the petition was sent to Treasury financial secretary Mark Hoban, FSCS chief executive Mark Neale, and FSA chief executive Hector Sants.

Informed Choice received a response from Wheatley on behalf of the FSA last week.

The FSA has asked the firm not to disclose a copy of the letter in full. However Informed Choice managing director Martin Bamford (pictured) says he is encouraged by Wheatley’s response, which discussed “the role of the regulator in minimising the burden on firms”.

The letter also asked advisers to help the FSA and the future FCA to identify potentially risky products which could cause consumer detriment.

Bamford says: “IFAs are best placed to do that, we are on the frontline and we are seeing these things being promoted to us. If we can flag them up before they become a problem, and an expensive problem at that, that has got to be a good thing.

“We know when the FCA comes into being it is going to take a much more interventionist approach. That will work really well in concert with perhaps a panel of IFAs flagging up problem areas before they arise, so that the FSA and later the FCA will know what to keep its eye on.”

He adds: “The regulator does recognise this is hurting the IFA sector and it is keen to hear about ideas about how the FSCS funding model could be improved.”

Investment advisers were hit with a £60m interim FSCS levy in March for 2011/12, to cover the cost of firm collapses including MF Global, Keydata, CF Arch cru and Wills and Co.

Last month the FSCS set the total industry levy for 2012/2013 at £265m, of which investment intermediaries will pay £78m and life and pensions advisers will pay £46m. Both sub-classes potentially face additional costs depending on the cost of compensating investors in MF Global and spread-betting firm Worldspreads.



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There are 26 comments at the moment, we would love to hear your opinion too.

  1. If we are to flag up the problems, why do we need such an expensive regulator?

  2. Couple of issues here; Why is the letter from the FSA confidential? In a time when they are asking for greater transparency than ever what do they have to hide? I’m also not convinced by a panel of IFA’s flagging potential problems with products. Under what remit would they operate? I imagine they’d just report it directly to the FSA. That’s been happening for a while and we’ve still have huge levies. Perhaps I’m being too pessimistic but this sounds to me like the regulator looking like they are listening while sweeping the problem under the carpet.

  3. Derek Bradley ceo PanaceaIFA 21st May 2012 at 4:55 pm

    @Austin. I share your concerns, but we should understand that Martin is dealing with an organisation that has certain difficulties regarding being open with firms and organisations that it asks for help from and it is freely given in return.

    I am not sure why there is a certain possible paranoia about being open but I am sure readers of this trail will be able to offer up reasons that may not be too wide of the mark.

    We found that after being asked by Sants and then Wheatley to meet with the FSA to discuss assistance with providing information and input around RDR awareness creation, that we gladly provided, it was met with no acknowledgement and no thanks.

    Perhaps this is a case of a lack of business etiquette too?

  4. I take it Bamford wants to be on the panel.

  5. Cut the costs – easy. Make any complaint submitted by a 3rd party (other than P.O.A.) liable to a £200 non-returnable fee.

  6. A panel of IFAs flagging up problems before they arise! Absolutely brilliant idea. Now we can have IFAs flagging up the problem of the next financial crash before it happens, the next fund manager that’s going to lose a load of clients’ money, and the next firm that’s going to dip into client money, and the next crook that’s going to walk away with client money. All we need is a good team of IFAs….

  7. Scott Taylor-Barr 21st May 2012 at 5:15 pm

    I do wonder if we should be stopping firms from being set-up on a Limited basis – a huge proportion of the FSCS burden being paid, by those of us still trading, seems to have been born by the fact the Limited status of failed firm stops the true guilty parties from being made to bear the costs of their errors.

  8. @anonymous 5.15pm
    So you’d like to be vulnerable to being hounded to your GRAVE would you, plus when you die, your widow could be hounded to her grave; happy with that are you?
    If you are, I suggest you visit a psychiatrist,
    or at the very least, lie down in a darkened room and revisit your point of view.

  9. Publish the full contents of the letter and be damned.
    I made an FOI request a while back and the reply came with an implicit threat of legal action if I shared the contents of the missive.
    Such a lovely group of people to deal with….not

  10. I Flagged up PPI insurance to a visiting FSA team back in 2006 after they had censured me for not offering the product!

  11. @Hugh Jeego

    The regulator knows as much about business as a monkey knows about hockey. The FSA is a farce and we’re paying for it.

  12. I’m sorry that this is just another waste of time/sop to the industry. They want to look like they care but I know from personal experience that when issues are raised with products and providers the regulator does nothing of note until it’s too late. We’ve seen too many examples of this recently.

    The only way to ensure at a least a reasonable chance of the product or provider being fit for the purpose is for the regulator to authorise them after they conduct full due dilligence using their massive human and technological resources.

    If a provider wnats to bring a new product or idea to the table let them pay for the due diligence bearing in mind they stand to make the greatest return from it.

    Then and only then will it be possible for the IFA to recommend a product or service with confidence.

    If things continue without that there will come a time when there will be no compliant PI on offer so the only firms able to trade will be self insured.

    Still finding myself very sad for the industry but not holding my breath for change as I’d be going blue and collapsing pretty quickly if I did!

  13. Great thinking Old Dog. Enter into dialogue with the FSA, get a supportive letter from them, and then publish their letter in full despite the FSA request not to do so.

    Informed Choice really would be able to continue their campaign from that position of trust wouldn’t you say?

    Honestly, I really don’t understand how some people think.

  14. If we are to flag up problem products, how long before we are fined for missing one?
    Why should we be held responsible when the regulator is unaccountable?[

  15. Hang on here; we all sign a petition which gets forwarded to the FSA and they reply as a result but we’re not allowed to see the response. No wonder we’re smacking our heads off brick walls. You couldn’t make this up if you tried.

  16. You’re right Hugh!

    I’ve reported companies to the FSA, don’t even get a reply, so I can’t see this working!

  17. Julian Stevens 22nd May 2012 at 7:56 am

    Is this a tacit admission that the FSA can’t do its job by itself?

  18. The reason why the regulator wanted Bamford to keep the response confidential is that it does not want exposed the illegitimate methods it is currently employing to ruin and close down the IFA sector, rendering us an ineffective critic of its dubious activities.

    Who could have imagined that in the first part of the 21st century, creatures from another planet (regulators are not human) eyed our sector with jealous eyes and determined to take away our influence on the markets. (Influenced by War of the Worlds opening speech)

    IFAs have been a positive influence for far to long in building up the capital markets by advising clients to invest in them via UTs, ISA, IVs, EIS Bonds etc etc.

    Now that there is a clear indication that there is substantial money floating around out there, the banks, who in fact really control the regulator, want all consumers under their umbrella, the regulator can then impose massive fines on them if they get it wrong (as they inevitably do) and fund the extravagant lifestyles of its senior executives and staff and when things look like they are falling apart, those individuals can bail out with golden goodbyes and thanks for coming.

    You have to love this country, who else would impose a system of changes, specifically designed (however allegedly unintended) to destroy a major sector of the financial services industry and impose at the same time increased regulatory and FSCS costs on an ever dwindling population of advisers and advising firms?
    Why of course the answer is obvious – The Financial Stichup Authority.

  19. Well done Martin but like others I find the FSAs response somewhat uninspiring.

    Our regulator in all its forms has not been very good as listening to those who actually deal with clients or concerns about reported bad practice. Instead they focus on there own conclusions and vision for the future regardless of how flawed it may be.

    Given past experiences I cannot see how IFAs flagging problems to the regulator will change things until they have a huge change in culture and listen more.

  20. Martin

    have you asked why the response cannot be disclosed – after all the petitiion was submitted on behalf of 1400 odd participants and many more interested parties – not just Informed Choice?

    Having said that – well done for pushing this along and actually getting a meaningful response at all.

    Ian Coley
    Medical Investment Services

  21. Martin Bamford 22nd May 2012 at 10:36 am

    To clarify something, the FSA has not instructed me to keep the letter itself private – that was a decision we made here as the letter was personally addressed and we treat all correspondence with the FSA as private. I will get in touch with Martin Wheatley’s office to find out if they have any objections to the letter being scanned and published in full.

    My interpretation of the letter is positive and I believe we have reason to be very optimistic about future reforms to the funding of the FSCS. The next step is to read the consultation paper when it is published later this year and respond to it with our own suggestions.

    Whilst I appreciate that the FSA publishes a lot of papers each year (too many for most IFAs to read and reply to), this is going to be one of the most important consultation papers they publish this year and I hope that every IFA makes the effort to respond.

  22. As far as alerting the FSA to bad practise etc. the wont listen unless the client submits a complaint. What makes anyone think that they will listen to an adviser flagging up ‘risky issues’ with product?

  23. So the article is incorrect?

    One of the side effects of a lack of transparency. I think you called this one wrong Martin.

  24. I think this a typical symptom of IFAs, take the one negitive point out from a highly positive letter (which then turns out to be wrong) then lambast the FSA for it.

  25. Duncan Carter 22nd May 2012 at 6:38 pm

    So is the answer to maintain the status quo? I can’t see how that will improve the situation by even a fraction of one iota.

    There comes a time when through diplomacy, bodies that may not always have made all the right calls are able to shift their positions for the common good. It does however require goodwill and a positive intent.

    I’m not naive but more of the same is not a good or viable long term position for any of us. Good work Martin keep us informed is my view, if it doesn’t work at least you tried.

  26. Peter Davies @ Create Wealth 24th May 2012 at 10:28 am

    The whole system could be made an awful lot simpler if the FSA had to authorise schemes before they are lauched and providers had to cover the FSAs costs of doing so. For example, any IHT solutions, any structured products, FSA authorised funds.

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