It is here. It has dropped, landed, hit desks. The wait is over for the Financial Conduct Authority (FCA) review of Financial Services Compensation Scheme (FSCS) funding. Now all advisers have to do is make themselves heard!
First of all, the consultation paper can be read in full here. It is an early Christmas present.
The FCA has posed 31 questions in its consultation paper but there are a few options IFAs need to focus on when drafting their responses (hint, get to your keyboards).
There are proposals in this paper which if followed through will cut advisers’ FSCS bills.
This will be by stopping firms from failing (so more claims can be paid by businesses rather than the lifeboat scheme), getting providers to contribute more to FSCS pay-outs ‘from the first pound’, possibly making advice firms that conduct risky business pay higher levies, and beefing up the minimum level of professional indemnity insurance cover firms will be required to hold.
Here are a few of the questions I think IFAs should be writing to the FCA about:
- Do you agree with the introduction of risk-based levies? Should the FCA also consider other regulatory responses?
- Do you believe that risk-based levies could be appropriate in relation to: a) higher risk investment products; b) insurance brokers that choose to place business with unrated insurers.
- Should product providers contribute towards FSCS funding relating to claims caused by advice firm defaults?
- Do you have any views about the current effectiveness, or otherwise, of PI insurance cover including in reducing the number and cost of claims on the FSCS, and about the role of PI insurance in providing compensation to consumers who have claims against failed firms?
- Do you have any views or suggestions about the possible features of more comprehensive, mandatory PI insurance? Do you have any suggestions about other possible tools, remedies or approaches which could be used to reduce the scale of funding currently required by the FSCS?
- Should the FCA seek to reduce the number of funding classes, to reduce volatility of FSCS levies?
As I said there are 31 questions and I have probably missed out some that are worth considering. The point is, even among these six examples (which can be found at the end of the paper under ‘list of questions’) there is already scope to make clear and forceful representations directly to the regulator that could fundamentally change the system.
Of course, the result you want might not be delivered. Just like voting in an election or referendum. But as with those things, you really cannot moan about the result if you refused to take part.
Now is not the time for cynicism, of predicting a stitch up, or complaint that the FCA ‘already knows the answer’, or should do. Complaining can be left for later if, having made your voice heard, nothing changes.
Already this year a single IFA, Darren Cooke of Red Circle Financial Planning, managed to get the law changed on cold calling through the petition he launched. Of course he had help, it was only when advisers and other financial services rank and file started adding their voices in numbers did the government take notice. This is no different.
FSCS bills have been hanging over the whole advice profession for as long as I have been writing about advisers (and longer than that). Please do not let this opportunity to make your voices heard pass you by.
Here are the contact details:
You can send responses by email to the FCA's Cosmo Gibson: firstname.lastname@example.org
Or using this form on the FCA website: https://www.fca.org.uk/cp16-42-response-form
Or in writing to:
Strategy & Competition
Financial Conduct Authority
25 The North Colonnade
London E14 5HS
Telephone: 020 7066 7630
The consultation closes on 31 March 2017.