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Apfa hits out at 'missed opportunity' for FSCS reform

by Michelle Abrego on Jan 18, 2013 at 10:29

Apfa hits out at 'missed opportunity' for FSCS reform

The Association of Professional Advisers (Apfa) has hit out at the Financial Services Authority’s (FSA) reform of the Financial Services Compensation Scheme (FSCS), branding it a ‘missed opportunity’.

The trade body has criticised the regulator for sticking with plans to raise the investment intermediary threshold from £100 million to £150 million.

Chris Hannant, Apfa policy director, said: ‘We are disappointed that the FSA hasn’t announced a more sensible threshold for investment intermediaries.

‘The regulator must recognise that the retail distribution review and the wider economic environment will affect adviser revenues. The lack of revision to the threshold for investment intermediaries is a missed opportunity to build a more stable and affordable funding model.’

Apfa did though welcome the FSA’s move to consult on providers cross subsidising parts of the Financial Services Compensation Scheme (FSCS).

In last year's funding review of the FSCS the FSA proposed setting up a retail pool, a collective resource funded by Financial Conduct Authority (FCA) regulated intermediaries and investment providers which would be triggered if one or more of those classes reached their threshold.

Under the original proposals providers which fell into the Prudential Regulation Authority (PRA) side of the FSCS funding model would not contribute to this pool.

However, 'in light of industry concerns about this approach' the FSA has opened a month long consultation on a proposal that all providers should make contributions when the pool is triggered by the failure of an intermediary.

It has proposed that the retail pool would include contributions from banks, insurers and home finance providers.

‘We’re pleased that the regulator has listened to Apfa and proposed to reintroduce a cross-subsidy if intermediary class thresholds are breached, as it is important that product providers retain some responsibility for their products,’ said Hannant (pictured).

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5 comments so far. Why not have your say?

Charles Rickards

Jan 18, 2013 at 11:15

FSCS needs to be funded transparently by the inclusion of an explicit FSCS charge on all products covered by the scheme. In addition there should be a levy at firm level for compensation payments as a result of non product compensation claims.

or option 2 is scrap the whole thing and let the consumer use the legal system if and when they have cause to pursue compensation.

I do wonder if the FSCS is seen by consumers as a no cost guarantee system?

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I'm an IFA - get me out of here

Jan 18, 2013 at 11:49

@Charles - transparency? That only applies when it suits the regulator doesn't it. I have always believed a product levy is a fairer way of funding.

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Philip H

Jan 18, 2013 at 12:02

Charles- of course it is. The FSA are at pains to ensure that it is - it makes them appear the white knights in times of trouble. I've asked a few clients and they all thought it was provided by govt.

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Richard Williams

Jan 18, 2013 at 13:53

As part of our Suitability letters we have started to outline what, in part, our Customer Agreed Remuneration pays for, FSCS, FSA, FOS, PI etc. Clients are more likely to accept fees when they know it's not just funding the new Mercedes or a flash office.

In terms of the FSA "consulting", don't make me laugh, they are paying lip-service to the word. You tell me any occasion where the FSA have listened to the IFA community and taken on board our concerns and I shall eat my JO2 manual........

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Andrew IFA

Jan 18, 2013 at 16:47

The FSCS has to move to a proiduct levy it is the only right and fair way for this to work.

Teh FSCS can build up funds with the levies raised, adn then it can be paid by all concerned, and paid for by those that will benefit.

Or is this just another ruse to kill off the small IFA sector even more.

Last one out turn off the lights please

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