National IFA LEBC has come out in favour of the FCA’s plans to extend the maximum compensation amount the Financial Ombudsman Service can require firms to pay.
The regulator said yesterday that the cap should increase from £150,000 to £350,000.
Adviser and wealth manager trade body Pimfa criticised the proposals, arguing they could drive advisers out of business.
LEBC Group director of public policy Kay Ingram, however, believes the increase is due.
She says: “This is reflecting the effect of inflation and the larger sums now being advised upon. This does not necessarily mean that regulated advice will become more scarce.
“Indeed, if mergers and networks are able to bring efficiency gains to smaller firms, by investing in technology and achieving economies of scale, it could increase access to affordable advice.”
The increase should be phased in over a set period to support the professional indemnity market, Ingram adds.
If smaller firms are struggling to obtain cover, merging with a network may be necessary.
Ingram also says limits should be reviewed in light of the FCA extending the remit for Financial Ombudsman Service to include charities and small and medium-sized businesses.
She says: “FOS needs to ensure that its processes are robust, so that it can oversee the settlement of larger complaints, in a manner which engenders confidence in its decisions.”