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FSCS hikes adviser levy to £112m for 2014/15

by Jun Merrett on Apr 15, 2014 at 07:47

FSCS hikes adviser levy to £112m for 2014/15

The Financial Services Compensation Scheme (FSCS) has hiked its levy on advisers for 2014/15 to £112 million.

The FSCS will levy investment intermediaries £112 million for 2014/15, a £7 million increase on its earlier figure of £105 million for the same period which it announced in January.

Despite this rise for advisers, the FSCS’s total 2014/15 levy is down by £37 million from its initial projections to £276 million, from the £313 million first mentioned in its plan and budget for the year.

The FSCS said the changes follow a review of the latest claims data and trends by the compensation scheme.

Only two sectors- investment intermediaries and home finance intermediation have had their final levies for the year increased.

The FSCS said the increase of the investment intermediaries’ levy includes the cost of Catalyst claims after it deferred a potential interim levy of £30 million in 2013/14.

It added that fund managers will receive a rebate from the FSCS as a result of successful recoveries by the Scheme relating to Keydata. The FSCS is understood to have made out of court settlements with five advice firms it tried to take to court to recoup the compensation it paid out in relation to failed investment Keydata.

Mark Neale (pictured), FSCS chief executive said: ‘There is good news today for many firms. Our overall levy for the coming year is down from earlier indications. That partly reflects an expectation of lower claims volumes.

‘But fund managers and investment intermediaries are also benefiting from our success in making recoveries. We have secured many millions of pounds for them and will continue to pursue recoveries wherever it is cost-effective to do so.’

21 comments so far. Why not have your say?

Financialplanner2012

Apr 15, 2014 at 08:36

So, when does the FSCS intend to disclose the full cost of ill-judged recovery action in respect of Keydata?

And, if there is a net cost, Mark Neale should resign.

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Julian Stevens

Apr 15, 2014 at 09:10

Presumably this is the outcome of the FCA's "consultation" on proposals for a product levy.

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Man in Black

Apr 15, 2014 at 09:13

@Financialplanner2012

Well, I think he's toast then.

The wider point though is that we need a meaningful inquiry into the F-pack's entire involvement in Keydata. We know that the FCA were applying their supposedly tense focus from 2005 onwards - taking issue with financial promotions, whilst ignoring the real issues here e.g. one of the main counterparties being run by a known so-and-so, the other potentially lacking the required cash-flows. Did their eventual, clumsy closing down by allowing PwC make a pitch for administration, and then relieving KISL of £millions by way of fees, not just make matters worse? et cetera.

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RegulatorSaurusRex

Apr 15, 2014 at 09:13

If the FSCS Keydata claim was sound why did they settle for a fraction of the amount claimed? 15% or 32% sounds a bit of an odd result.

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michael bates

Apr 15, 2014 at 09:42

It's about time the levy was scrapped altogether - it implies that all regulation and cleansing of advisers has failed and signals alarm to the consumer - who is the end-payer.

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Gillian Cardy

Apr 15, 2014 at 09:49

@RSR because, like any legal action, however sound they think the case is they have to weigh up the risks (and the costs to the rest of the industry) of pursuing the case against the benefits of getting something back now ... though I have to say, the point of the legal actions was to establish "precedents" against which all other firms would be judged - so without those legal judgements any other firms still waiting to settle should take note of these outcomes ... and negotiate accordingly.

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Chris Miller

Apr 15, 2014 at 10:11

Mark Neale, ( pictured - smug) what a spin-meister, dressing up the bad news of a rise in adviser levies as good news for 'many' others. That's really made my day; I'm so grateful.

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RegulatorSaurusRex

Apr 15, 2014 at 10:12

I fail to see how the FSCS, or more importantly those who fund it, can be happy with a situation whereby they pay out on the basis of misappropriation of funds and then launch a class action against the adviser firms alleging negligence.

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Andrew Dickson

Apr 15, 2014 at 10:14

£112m for intermediaries this year and £276 in total.

Does anyone have the figures for last year ?

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Jonathan Kirby

Apr 15, 2014 at 10:21

And this cost spread between 30% less advisers than in 2011 by the FSA/FCA's own figures.

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Chris Miller

Apr 15, 2014 at 10:33

RSRex

Despite the FSCS being morally bankrupt and intellectually bankrupt,

they milk us because they can, without any comeback. ( See Russia circa 1917 - 1989 for details of this dictatorship and any others that spring to mind).

Good 'ere innit?

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Julian Stevens

Apr 15, 2014 at 10:48

Well, Chris, you know what's needed to put a stop to the regulator's freedom to do to us whatever it likes with no comeback. I've been banging on about the solution for long enough but, for reasons that elude me (perhaps a sense of hopelessness?) I don't seem to have managed to garner any support for the idea. And APFA.......

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Ian Lees

Apr 15, 2014 at 11:55

How many ways can the Government increase COST, against businesses - by introducing high entry costs . . .by high on-going costs and by increasing the already High Costs associated with the FSCS. Perhaps the Adviser community - like Scotland should file for INDEPENDENCE . . . .. FREEDOM !

These associated . . . . .costs are a result of poor understanding by the FCA - on WHO is to Blame for these record numbers of what is effectively Fraud - the banks and insurance companies - who refuse to accept responsibility or act with professionalism or Integrity . . . .These FSCS costs should from now on, be identified and known as . . . . . . " The Rip Off Costs ! "

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Chris Miller

Apr 15, 2014 at 15:44

@Julian

Rather than fight this debilitating levy and in the interests of letting my Clients know of the iniquitous cost of regulation, I'm pondering whether to dissect the cost of services when I invoice them. The bill will be itemised out, with an element showing the cost of regulation in respect of their bill.

To be specific, this item would be explicitly designated:

Client's

Regulatory

Additional

Percentage

I'm sure my Clients would be horrified at the amount of C. R. *. P they are burdened with as a result of wasteful and incompetent regulation.

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Julian Stevens

Apr 15, 2014 at 16:04

No, we can't fight the levies, Chris, but what we (and the bodies that claim to represent our legitimate interests) ought to be striving for is the creation of a Statutory Independent body that won't have to fight. It'll just tell the regulator to get its house in order, stop ripping us off left, right and centre to fund its own extravagances and fiscal incompetences and, unless it wishes to incur severe and meaningful sanctions, it [the regulator] will have to comply.

I have a dream.........

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Ian Lees

Apr 15, 2014 at 21:22

@Chris Miller, given the beans counters in banks cannot accept client money on deposit without charging them ( eg Barclays - Santander and LloydsTSB ) I think such a breakdown of costs would indeed be a most useful, clear and transparent and demonstrating the additional Tax on Adviser's and Advisers businesses by the FCA as " Government Regulator " and their cronies in FOS FSCS etc., It could be extended to demonstrate the cost of Professional Indemnity - so that a clear cost breakdown for each identified charge. It may be that some of these may be reclaimed through the HMRC ?

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Charles Rickards

Apr 18, 2014 at 11:13

All of these figures are pretty meaningless. It is obvious that the cost of running the scheme is the major reason for the required increase. But what is it as a percentage of turnover or however they calculate the amount individual firms have to pay? I will be happy to disclose to my clients the percentage of my fees goes towards supporting this costly levy.

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Paul Nedas

Apr 18, 2014 at 12:06

I have made this point previously because I think the focus on the FSCS is actually missing the point.

The function of the FSCS is to be the last resort for clients who have valid complaints against regulated bodies which have been declared in default.

It is a condition of regulation that regulated bodies maintain professional indemnity insurance.

Therefore I would suggest that many valid claims end up with the FSCS because for whatever reasons PI insurers are able to escape their liability.

Of course, in some cases, the advisor may not have actually had valid cover in place.

So rather than simply focusing on the FSCS, the industry should recognise that significant reductions in the Levy could be achieved by ensuring that the FCA & PRA implement effective enforcement of the requirement for valid PI cover and effective notification of potential claims. The FSA demonstrably failed to achieve this.

In many cases, claims are not covered because advisers have fail to notify insurers within the appropriate time (heads in the sand!!!).

A suggested solution: The entry per firm on The Financial Services Register could be extended to include details of the PI insurance including insurers contact details, details of cover etc and advice to clients that in the event of making a complaint, they should also directly notify the insurer and insist on confirmation of receipt.

This might be a pain for the advisers who always provide compliant advice but it would ensure that a greater proportion of compensation would be paid by insurers thereby reducing compensation paid by the FSCS which would result in a reduction in the FSCS Levy.

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Ian Lees

Apr 18, 2014 at 12:19

Many claims made now are the result of the " Claims Culture ", and people making claims because they see the insurance company as an easy target - or the HMRC as an easy Target . . .and because many firms and PI insurers refuse to deal with fraudulent claims preferring to roll over and pay up . . .the new highway robbery. I have one case where a national organisation wish to pay out " compensation " to someone who has no Terms of Business in place. Another already reported as Mr P who is claiming commission paid after he recycled pension income to obtain tax relief - and dealt direct on execution only - without informing the advisers - and wants the commissions to be paid to him. Currently the head of the Financial Ombudsman Service has " found in his favour " . These are the opportunities brought forward by reckless incompetent employees - who remain untrained - unethical - and severely lacking in knowledge. No wonder there are so many claims - when they are dealt with ( or not ) by these incompetent individuals .

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Paul Nedas

Apr 18, 2014 at 12:35

@Ian The subject of the article is THE INCREASE IN THE FSCS LEVY & my comment is focused on achieving a reduction of the Levy.

Whilst I agree with your comment, it is not strictly relevant because it raises a different but related problem = how to differentiate compliantly/fairly between valid & invalid.complaints/claims.

I am confident that we can all agree that the current structure satisfies neither advisers or clients!!!

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Ian Lees

Apr 19, 2014 at 08:05

@Paul . .. I agree the FSCS fee is inflated, is increased and continues to increase. My poits are the reasons behind these inflated fees these inflated increases - which are the negligence and the incompetence of the FCA as a regulator - their failures their on going failures - which advisers are paying for. If a business person had an area of expense - which was useless ( IE provided little or no benefit ) - they would cut out this cost. The Government and the FCA - like the NHS thow millions of pounds at a problem ( eg recent Court Case ) - to cover up their incompetence - Rather than deal with their problem. No wonder fees increase. It is in my opinion the negligence of those currently in Power - who have no idea how to run a business - and refuse to allow other good business practices to thrive or survive. You may have noted the reduction in advisers and adviser practices - like Parking in St Albans reduce the supply and Hike the increases in Costs - against the Few remaining survivors . . . .of FSA/FCA purgatory or those publicly spirited enough to REMAIN and work under excessive the pressure of such a Cauldron .

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