Advisers have hit out at the Financial Services Authority’s (FSA) reforms to the way the Financial Services Compensation Scheme (FSCS) is funded, claiming they will push firms out of business and lead to increased client costs.
The FSA confirmed plans to raise the investment intermediary claim threshold from £100 million to £150 million, rejecting plans for prefunding or a product levy.
In its cost-benefit analysis of the reforms, the regulator said that when combined with the possibility of 10% of IFAs retiring due to the retail distribution review, funding the £150 million threshold could account for up to 30% of the remaining advisers’ revenue.
Chris Petrie (pictured), director of Northampton-based Christopher Charles Financial Services, said firms would struggle to stay in business if IFAs had to fund the full £150 million.
‘At that point the system will break because so many firms will pull out of the market,’ he said. ‘Then it will become maybe 60% to 70% of someone else’s turnover. It will just self-implode.’
Emma Ames (pictured below), co-director of Exeter-based Cathedral Financial Management, said the firm had already raised clients’ ongoing fees to cover FSCS levies. ‘It doesn’t matter how many people shout [the FSA] does what it wants,’ she said. ‘It is worrying that it makes things even more difficult.’
Paul Richardson, managing director of Concept Financial Planning in Reigate, said the outcome was disappointing for IFAs but worse for consumers.
‘I have to pay the bill, but ultimately I am not paying the price,’ he said.