Rocketing FSCS bills: advisers pay up to 780% more

Why is the guy pictured smiling?

At a time when we are running a tight ship, constantly monitoring costs and ensuring that we can continue to maintain the staffing levels that we have this is a bitter blow!

A 400% increase in our levy and not one single Keydata plan recommended - where is the justification? Scandalous!

I wonder if H.L have to pay so much of an increase being that such a large proportion of their business is "execution only". After all, if you have not given advice, why should you have to pay into a compensation fund necessitated by bad advisers.

So, if the answer is, "They don't", they have the perfect business model.

Our increase was 824% !! a slight increase over RPI...

thank you kind Mr FSCS!!

Everyone please make representation to their MP and other trade bodies.

If the FSA were better at doing their job then there would be no need to have the FSCS. Beyond that investors who purchase unregulated products carry the risk themselves. If this is not disclosed by the adviser at point of sale the adviser must be personally liable.

May be wind! I can never remember is that a photo of Ant or Deck?

Just had interim levy and it hurts. We have reserves but did not build them to pay for others misdemenours. No complaints yet hit by a huge bill.

Grossly unfair and demoralising.

Steve - I think we are all tired of lobbying AIFA and MP's. It gets us no where. We are an easy target. We do not have have the funding to mount a meaningful challenge and we have no choice but to pay.

its time we said no, enough is enough. who is the voice of the ifa.

this is stealing money out of our pockets and we are all stupid because we will pay it.

time to say no.

Makes you want to go out and sell a few policies on commission quickly to pay for it ..........ducks......................

It all comes down to the tariff data supplied annually in Section J of the RMAR. Businesses that experience substantial increases in the interim levy will either have seen a greater proportion of investment business or a greater turnover compared to last time. For the biggest increases, most likely a combination of the two has taken place.

Two thoughts;

1] In the unlikely event that the Lifemark policies pay up, will we get a refund?

2] As these costs come out of our revenues, presumably i can adapt my client agreement to include a client levy charge to help mitigate this cost?

Grossly unfair.

Never advised on a Keydata product in my life although I have had to pick my way through them for new clients.

My Firm's bill is almots £10,000 - well it is over £10,000 if I avail myself to the credit facilities and pay over 10 months. I would like to see how much the FSA earns from the credit agreements !!

We must be in the only proffession that cannot predict it's costs acurately from year to year !

I could go on but have to see more clients just to stand still ...............

Next time we have a criminal trial and the defendant skips the country - especially if the miscreant lives somewhere nice - Chalfont St Giles or Cheam - we should send the FSA round summarily to arrest and imprison the innocent next door neighbours to serve the sentence the criminal has skipped.

That's 21st Century justice - or am I just a "21st Century Schizoid Man"

I agree with you Joey.

It is time we all stood together and said no to FSA increases, no to FSCS increases and no to RDR.

Sands and his cronies are taking the P***

We have to pay the levy because it is part of the regulatory fees. Failure to pay would lead to deauthorisation. When we do try to mount a meaningful challenge, it gets us absolutely nowhere as demonstrated in the judicial review led by Regulatory Legal. So, we must pay the prescribed amount each year as there is no alternative.

But as the rash of expensive advertising the FSCS has conducted recently suggests, this scheme has been established by the Government!

No mention however of who is paying, either the compensation or for the advertisements.

The whole regulatory structure is broken but there are too many vested interests at play to either admit it or to want to do anything about it.

This has become your prison, Mike Fenwick said it would 25 years ago, nobody listened.

If you offset the fines with the compensation payable, then we need only to pay a few pennies, we might even be in credit.

But we know that wont happen

It all comes down to the tariff data supplied annually in Section J of the RMAR - this is for mediation. Question about this section - what about VATable fees which are not intermediation? Do these go in this section?

This is absolutely scandalous!! Our FSCS levy has increased by almost 300% from last year, having doubled last year when compared to the previous year. How can there be any reasonable justification for this? Have the FSA actually assessed the impact of this decision or perhaps it is another blatant attempt to consign firms with low capital resources to the scrap-heap!

Ours has risen from £6009 to a colossal £51,454. We never advised on Key Data and have sold no structured products. Is that fair? No. We run no 'products' either but manage funds discretionarily. We're unimpressed to take the prize of the biggest increase (856%) and our FUM are still below our previous peak so how is that for a pleasant post.

255% increase and I've never touched a Keydata product! We really are a soft touch - the whole system stinks to high heaven.

But why is Martin Bamford complaining? His business is RDR ready so everything should be hunky dory. Except it isn't because, no matter what you do, the FSA will screw you into oblivion just like everybody else.

That aside, I still don't get how, if KeyData was an intermediary, anyone can have lost money by its failure, unless the directors were raiding the company's client money account which, as far as I know, they didn't. If they had been, that would have been a criminal offence.

So the only cause of loss can have been failure of the PROVIDER with which KeyData was, as an intermediary, placing client monies. And, if the provider fails, that isn't the responsibility of the intermediary sector.

The whole thing seems to have been maliciously engineered so as to bludgeon the IFA sector with yet another special levy. Can anybody shed any light on this?

Just in case everybody has missed it the manderins who dream these thing up are all "Employed", they have no concept of running a business, keeping costs down, or that every time they increase a levy, they will hirt the clients who they are supposed to be protecting! in the first place.!

Whilst I accept that everyone is angry about the levy, itt is based on your turnover so if your turnover is up significantly then your levy likewise is going to be up.

As we all complete an RMAR we should all be aware to a degree of how things are going within your business and therefore how fees are going to affect you. Whilst quoting figures can always look alarming, it would be interesting to know how much Martin Bamford's turnover is up in relation to the percentage rise in the levy. Particularly that element for which it is charged.

To Michael R ~ There is an alternative (and not just quitting either).

Blimey, we now feel "lucky" to only have a 520% increase!

Question: now that the £100million has been used up for our "sector", does that mean IFAs cant be billed for any more failures of ANY kind originating in that year? ie can we assume no more annual or periodic levies?

Hang on, just occurred to me, didnt we have an £80million bill partly for Keydata last year too? Does that mean the £100million limit isnt triggered by the year in which the "failure" happens, but just by when the claims start being met? Does that mean a £500million failure could just be billed to us slowly over 5 years??

Bob - ours was def NOT up 520%.

Julian; we're all ears!!!

Where's Guy Fawkes when you need him....

RDR seeks to stop cross subsidy. So, Mr FSA, Government and FSCS how is this far.

No Keydata, No Cru fund, no complaints, even through the worst financial crisis in 100 years. So, how am I rewarded for my hard work, ethical advice, clear advice and for treating my clients fairly, I HAVE TO PAY FOR THOSE THAT DID NOT.

As stated already we are having to pay for the regulators failings. If the regulator had been on the ball, this would not have happened. If I could see the dangers of these funds, surely some highly educated regulator could have seen it.

As for those of you that keep saying there is nothing we can do. Sorry, it is time to stop and make a stand. We may be small but we have numbers and market share. The problem is only a handful of use put our heads up to be shot at, as most are to frightened of the FSA and what they would do. So be frightened and be out of business within the next few years.

Frankly I would get ride of all compensation schemes and tell the consumer it is there duty to make sure they understand the risk, because if they make a bad investment they will not receive the money back. Go into a Ladbrokes and place a £10,200 on a horse race, then when it falls at the first fence, ask for your money back. The fact is the consumer believes that they should be given any loss back, in this nanny state of there, there, never mind we know it cannot be your fault because you did not read the paperwork.

Rant over, going to pub as the news today has been enough to make me jump of a bridge.

Like other posters, I find it more than a little irritating that, despite being suspicious of Structured Products in general, and being unwilling and isufficiently stupid to touch anything involving Life Settelements at all, I have to meet this appalling and unjust levy increase (450% in my case).

However - at present, the decision to recommend, or not to recommend, this product, is mine.

Post 31/12/12, if I choose not to consider this type of product, or indeed others, and reflect this in my Key Facts and Customer Agreement, I will be classed as a Restricted Adviser.

I assume that thereafter, I shall be exempt from any FSCS levy in respect of products and activities from which I have excluded myself?

Assuming that the FSA have considered this, and are indeed capable of telling their arse from their elbow, I would be interested to have their confirmation, or am I being naive?

Can anyone give a quick clarification on how this is calculated. We will be looking at the FSA website tomorrow but is it based on turnover,staff levels or what.

We now have a bill for £12K which is up from £4K last year for just two of us !

@ Bob Donaldson,

Sorry I have just come in and missed your point. However in our case our turnover is not much changed for the last three years - more profitable but that cant possibly count for the vast increase.

Isn't this a perfect example of why we need a strong, united voice to represent us? Getting angry will not help, getting organised might do. Has anyone any constructive ideas?

and AIFA are quieter than ever before

I think they are all anagrams of that famous Danish king who sat on the beach and commanded the waves to go back.

This is akin to having to pay extra council tax to pay the fines of those who burgled my neighbour.

I do agree with some though - a proper action plan to say "enough is enough" is called for.

This is just the start of things to come.Wait until if you dare, to see the RDR levy!

Product provider firms simply pass the levy to their customers by way of increase fund charges or policy charges. It is obvious for the comments here that most IFAs don't formally pass the charges to their clients. They must, and the FSA has no problem with that. They are not expecting you to give up your profits to compensate others. They expect you to have a mechanism in place to pass the costs to your clients.

The problem is finding a method that is equitable to the clients of all IFAs.

I propose that we add an Investor Protection levy (IPL) to our fees/ invoices explicitly, and remit these payments quarterly to the FSCS. This avoids a product levy, which was a non starter. Consider the IPL levy similar to VAT.

How should the levy be calculated?

We could take a guess and say 2%, across the board, but better still might be to get the FSCS to help us arrive at an appropriate amount, based on their previous year's payout and the type of product claimed against.

Remember the FSCS won't care how the money is collected so they are likely to be co-operative.

We should recognise that some products carry higher potential claims risk than others so the levy could differ accordingly.

The aim is that :

- provision is made by the client at the point of sale

- every client pays the same levy regardless of who his/her IFA is

- there are no claims against IFAs. It is pay as you go for all investors.

Any takers?

There is another way

I strongly recommend we all copy this article - and the 39 comments thus far giving examples of the ludicrous rises - to our individual MP's.

There's no point in us wittering on about it in this blog because no one else reads it except other advisors (and maybe the Citywire editorial staff).

Therefore, for those that haven't already done so, get up off your butts and do something about it.

You'll only have yourself to blame if your business consequently goes t!ts up through rising levies and you've made no effort to fight it.

Happy to do that but I still think a concerted/focused effort would be more effective.

Excellent point Owen, I fully concur !!

Request to Citywire Editor in chief ;

Please kindly supply a full unedited version of this blog to number 10 Downing Street, a copy to Parliament and as a courtesy copies to the fsa and fscs servants.

I ask, "what would the French do"?

So the government uses ‘short in supply’ taxpayers money to potentially bail out one undone disaffected section of UK society (Equitable Life policyholders) but through FSMA 2000 the Treasury/ Government/ FSA has found a legal way to use and abuse its own self created powers (through the Treasury henchmen at the FSA) to extort record fees/ levies away from the remaining ‘good’ members of the IFA community. This is 100% unadulterated extortion against the very IFAs they claim under RDR are the nation’s financial future.

For any MPs reading who just don’t get it - imagine any honest decent good MP who does not fiddle his Parliamentary expenses who is forced to pay the criminal fines of those criminal MPs (or face the time in Prison for their criminal act or more accurately face losing your MP position and status if you refuse to pay the fine). Then you will go some way towards understanding the plight of IFAs and this is just typical of one of the daily injustices meted out by the inept and corrupt FSA regulators against the oppressed IFA sector. The extortionist Stalinist bullies at the FSA/ FSCS demand extortion fee levies similar to any indecent east European protection racket system without consequence (such is the behaviour of a corporate psychopath – that is if the FSA regulator had any conscience or morality which it doesn’t).

The Keydata saga and the very fact that the FSA/ FSCS is having to issue high fee demands to clear up after its own regulatory failure is clear evidence that the FSA/ FSCS has failed and is not fit for purpose and is not accountable to anyone including its members or the tax payer. The issue of accountability is the real issue not addressed by any loaded court case in its favour. But the Treasury (Government of the day) is the FSA policy-shaping body. This means the government is responsible for the FSA’s failure AND is therefore responsible for the removal of the FSA /FSCS failed system (through repeal of FSMA/ Acts of Parliament). The point is that so too should ultimately the burden of FSA regulatory failure be paid by the taxpayer. Make no mistake Keydata is an FSA regulatory failure no matter how much the FSA blames or wants to fine ‘good’ IFAs to bail out their regulatory incompetence. It happened under their flawed systems and their Financial Watchdog watch. Just as the government decided part of the missing £1.5BN Equitable Life blackhole should fall on the taxpayer, so too is the bill for regulatory incompetence a matter for the tax payer at large NOT on an ostricised brow beaten professional upstanding IFA community who do not deserve such injustice. PII insurance for good firms answerable for only their own failings, please and not FSA extortion, please. If the tax payer at large was having to cough up for the not fit and proper FSA city regulator, just how long would the FSA last?? Point is under public scrutiny i.e being 100% accountable to the taxpayer, the FSA and regulatory regime would but evolve into a meaningful regulator not a Clandestine Gestapo Secret Financial Police Force who are accountable to no one and can do exactly what it likes without any fear of retribution, recrimination or accountability. Nothing changes. The FSA in its current format is above the Law. Above the Law means no justice – ever - period- for IFA firms or members as long as it exists having been created by an Act of Parliament with unlimited powers. There is no authority without power. FSA has all the power in the world. Absolute power corrupts absolutely. For those who think this is rather extreme for the little old comfy and cosy UK system of British Justice for the IFA, think again! The FSA is the living embodiment of all that in a free Western democratic economy that we would vehemently oppose if we saw it happening in Communist Korea or Stalinist Russia. Yet it is the IFA community that is singled out, treated like a criminal. Even when individuals do no wrong, they pay for the crimes of others or risk losing their livelihood if they refuse to pay the FSA extortion fee levies or go to jail. Final Notices, Enforcement, fear of reprisal by those who might challenge the FSA power machine, unchallengeable fines and levies (the FSA can after all fine or levy what it likes without impunity) all means an unchallengeable FSA regulator who is not fit for purpose or accountable.

The failure of the FSA to come up with the right system with the appropriate classification for Keydata instead of lumping it in as IFA style Intermediary is one of the real issues and unaddressed crimes in the current blighted system. Can hardly see the FSA backing down on its own failure, preferring instead to lure Regulatory Legal into Court to legitimise its wrong policy classification system and give the legal means to dish out the injustice of unaffordable fee levies. That’s what ‘doing business with the FSA’ is really about and don’t believe otherwise. Going to court to win a certain legal battle missed the point about the negligent FSA and lack of understanding FSA, the lack of any RISK WARNING from the FSA to IFAs that they would have to fit the bill to bail out ‘Non IFA’ style intermediary firms. It was blindingly obvious to all but the stupid FSA legal team and officials who classified Keydata that it was nowhere near close to being a typical IFA intermediary style firm. So all this Fee Levy furore is 100% due to the FSA error in classification by the FSA once again demonstrating their incompetence and culpability, yet their elusive corrupt practices know no bounds in avoiding acceptance of their failure. Would anyone in Korea admit in front of their benevolent leader that their Secret Police should be disbanded or that they got something wrong? But there again, should we surprised as the FSA never have to admit to doing anything wrong as they are above the Law and of course we all know they can never legally do anything wrong, otherwise they would have to theoretically pay out. Why is it that they openly don’t wish to regulate financial products again...oh yes they are afraid of carrying the financial can for their almost certain incompetence and failure!! A 100% certain Lawsuit payout against the FSA every time!! One thing upon which the FSA is not daft is when it comes to things it has researched well through its own massive legal budget spend. Preservation of power through its legal research team will hardly endanger the survival of its own species. Darwin would be very impressed by the FSA’s ongoing survival and its all powerful corrupt survival techniques. Sadly there are still no signs of any cracks appearing in the concrete cement of the FSA powerbase as this is certainly not on any meaningful agenda.

The FSA abuses its power for two reasons - firstly because it can, and secondly, because in doing so, it can get away with it. A truly FSA wonderful stitch up and all this in a country which clearly cannot claim to operate under the spirit of democratic justice for all its citizens. As far as I am aware IFAs are still individuals with rights and are at least recognised as citizens within Europe if not the UK Law any more. As an IFA citizen I don’t remember signing away rights or opting out of the UK Legal Justice System (Treaty of Rome or otherwise) in order to be continually and systematically persecuted and treated as a criminal even though I have done no wrong.

Ironically, history tells us that the FSA came into existence in 2000/ 2001 only shortly after the Human Rights Act was introduced in 1998 which was supposed to strengthen our rights as UK and EU citizens. Trouble is no one told the FSA. As an individual IFA, alive before the FSA was created, I have a dream....that one day justice will return to the IFA citizen with the disbanding of the all powerful all corrupt FSA regulatory entity now dangerously out of control. People on the street think that this does not matter to them as it is just the IFA citizen who suffers. Think again. To the FSA, you may take away my money, you do extort all you like, but you will never take away my dream. That one day the force of change will happen when the FSA will eventually be disbanded and replaced which will be for the good of the nation’s financial health. Until then I guess we just pay, pay and pay yet more again....

As N&P are no longer to operate an "IFA" they of course will not share in this burden.

Aren't you happy for the CEO and the IFA management team in N&P to be walking away with their assets intact and ability to carry on working, while their erstwhile customers suffer losses and my clients and your clients pick the bill for their greed.

Perhaps Mr Bamford a vocal supporter of the FSA and its proposals to further diminish the IFA pool might consider himself lucky that his increase is relatively small in actuality. Had this been 2013 then he might well be facing a considerably larger demand.

Banged To Rights!! - Youve got to be kidding. ARe you serious? N&P are not even paying anything towards this??????..someone tell me he's wrong please ....

Also, perhaps the Govt would consider paying to the FSCS the income tax and Corporation tax that they received on all the missold earnings derived from these sales?? - as I presume the recipient firms and individuals are having to repay any monies earned? at least i presume thats the starting point for raising money?? anyone know?

Firstly I thought AIFA was supposed to represent IFAs - clearly not a lot. Perhaps its time to trim costs and cut out that particular subscription. Secondly perhaps its time IFAs told their clients what's going on and add a 10% surcharge to every bill to ram home the fact that, in the end, its the customer that has to pay for this nonsense.

Perhaps we can move away from the regular moaning that populates these blogs and try to address this very serious issue.

There seems to be a large disparity in the increases being highlighted here as well as contradictory evidence as to how the charges have been determined.

I am quite happy to share our firms numbers to try and understand why we are being asked to pay £12k this time as against £4K last year.

We are just two advisers and our turnover has not altered significantly over the past three years.

We have not sold a " packaged product " of any description for the last 7 years and our income comes from our clients own cash via a wrap with no involvement whatsover with providers.

The relevance of this information is that the proposals of the RDR are for the adviser community to more or less mimic our model on the basis it is better for the consumer. And yet we remain trapped in the same mindset of compensation by the FSA so what on earrth is the point of the whole exercise.

We no longer have the ability to embark on a sales campaign to generate the extra revenue needed to pay this " fine " and many of you will know that is almost impossible to suddenly increase an established recurring income based on a formula such as AUM.

There is an amazing lack of real content on this blog other than moaning about the FSA etc.

If we are to fight back we have to create a real case with supportive facts.

So if anyone is really interested in taking this further please indicate quickly.

@ Ian Williams

Ian, AIFA has been a case of "The Emporor's got not clothes" for a long time now. Some of us saw this five years ago, and in spite of all their subsequent lip-service to the IFA sector, there is no evidence of any change (of clothes).

The FSA pay lip-service to them, sometimes make them feel listened to, then laugh when they've gone away.

@ Philip Melville

I'm guilty of ranting too Philip, but would like to take this further. (I have already contacted my MP). I have always had time for your considered comments. What did you have in mind?

Philip

Youre right. But, when this issue cropped up last year, even though our bill was insignificant, because of the principle involved I got in touch with my MP, and sent documents to the FSA and TSC, not just with what I though were cogent arguments as to the injustice and ultimately impractical nature of this system, but also with alternative suggestions. Obviously nothing has happened, not that I expected it would based on my little voice. Finding a way to act, including SOLUTIONS that work better than the current system is not easy and probably does require collective action, throught through and communicated effectively to the ears that matter, assuming of course those ears are open anwyay.

The more pertinent question is, if that isnt happening already, then how do enough interested people make it happen? Put me on your list, so thats at least 2 of us.

interesting comment Philip Melville - often these blogs seem to be moans targetted at the FSA rather than coordinating a response that may actually achieve something.

The problem is that the bodies that "represent" us seem powerless, the legal challenges have achieved nothing, direct action such as withholding payment gets us deauthorised - what else is there?

I am a sole adviser with 4 other members of staff our fee has increased 363% so I feel I have got off somewhat lightly but at a time when we are all having to prepare for higher capital adequacy costs, set funds aside for a stationary reprint when the FSA changes its name and dealing with RDR and the associated costs it seems incredibly unfair to be landed with a large bill which is totally outside our control.

in terms of soft target, I guess the IFA community is so disparate that it is unable to raise a substantial and coordinated response that makes the regulator listen. Until we have a real representation backed up by the majority of practitioners we may just have to accept the battering.

For the record we have had no client complaints and no failed products - never liked Keydata or Cru or many of the other similar products. We continue to pay for the failures of our competitors to the cost of our clients - I wonder how they will respond to our proposal to add a levy to their annual fees - seems a question will be added to our client survey this year!

Phil you can count me in. I contacted my MP last night and have another former MP in mind and I plan to approach him for some ideas on where to focus with this. On a side issue, moaning is one thing but I think some of the more Anglo Saxon references above detract from the seriousness of the arguments that we need to put forward here, we need to take the heat out of these comments and deal with it in a much less emotional way.

Phil

The powers that be would say that you did sign up for this and I would be first to agree. The regulator told be they thought funding up front would be better than thi system of being handed a bill you had no way of knowing was going to be so high, in many cases high enough to cause problems with capital adequacy. The regulator said that the industry preferred to keep control of its own finances so that is why we are here on this blog.

The regulator insists that you should be able to establish your financial situation down to the last penny on a daily basis, this is impossible when you have such massive failure caused by the regulators.

Back in the 80s Mike Fenwick said this would become our prison and it has. We were promised a review of the compensation machine, it has been shelved because of the regulatory overhaul the new government has embarked upon, we have a chance to make sure we have a system which is fit for purpose, fair and reasonable to the bone, but who would you trust this time around? The same people who made a hash of it in the past?

We have a plan.

The online petitions to No 10 appears to have been suspended as clearly "We're all in this together" Dave doesn't want the hoi polloi suggesting things.

That said, I will happily contact my MP but I agree that a consistent, measured and cogent method of approach is required. For instance, let's not drag all the other issues in here, such as RDR, grandfathering etc - this is about the disgusting way in which we have to pay for others mistakes and malpractice.

A P.S. to my previous post - I have just sent an e-mail to my MP. This is also a local issue for me and him as I am based in Norwich.

@ Evan,

I agree that I did sign up for this and I also " signed " up for the need to change the way I did business - at the age of 59 and after 29 years of selling products to earn commission.

I absolutely believe that we can change anything if we have the will to do it.

I am happy to be responsible for my own actions but cannot see any reason why I should accept responsibility for the way others choose to do business. Equally I have no idea how I would tell my clients that they should pay for the actions of other advisers.

The FSA are largely career civil servants and we should only expect them to have an eye on their own career progression. It is our job to influence them whilst recognising the weight of opinion which is against us in the public domain.

I dont have a plan right now but will be happy to work with others to produce a plan and to do whatever is necessary to at least have a coherent case made in the right places.

I have a plan, let's all write to the FSA and state unequivocally that if the RDR is not set aside, commission remuneration choices reinstate and , the FSCS funded differently by an industry wide products levy, that we all intend to request de authorisation on the same day, effective as of 21st December 2012?

We can then all apply just before that for a job at our local bank or building society and thus take away the FSAs ability to exist or heaven forfend, retire and or change career paths.

The above probably makes more sense than putting up with this increasing assault on our right to trade freely and earn a living.

I would imagine that if MPs and the FSA board received such voluminous requests to de-authorise there may be some consternation in their ranks, where are we going to get our money from for our excessive salaries and expense accounts now that the IFA sector has gone?

"I know" one pundit will say " We can apply a continuous retrospective levy on all former IFAs annually based on their last three years turnover and apply that for life as an annual fee"

"Good idea ! We could increase it each year in line with inflation so that if the economy goes into meltdown, our jobs are assured for life"

"What happens if the IFA dies or moves abroad"

"Oh that's easy, we can charge the clients family for it as an extra Financial Services Tax charge!"

"Right, that's problem solved then, now where are we going to have our OTT Xmas party this year?"

"I think Berrmuda is nice at that time of year !"

Anyone think this is unlikely in light of past events?

You can not apply to Barclays - they have just announced they are to shut up shop in the "advised" retail space.

My (LibDem) MP has ignored everything I've sent him, so he obviously doesn't give a fart about the plight of the IFA sector.

Regulatory Legal managed to get a JR of the FSA's determination of KeyData as an intermediary but lost. In my view, GF pitched his case wrong. Clients lost money as a result of the failure of the provider (LifeMark), not as a result of the failure of KeyData as the intermediary. If KeyData was just the intermediary, then all it was doing was passing client money on to LifeMark via its legally ringfenced client account, which would have been untouched by the failure of Keydata itself. So how can the consequences of the failure of LifeMark, the provider, be laid at the door of KeyData, as the intermediary?

The FSA takes little, if any, notice of anything that AIFA says.

The FSA takes little, if any notice of anything that Parliament says.

The FSA takes little, if any, notice of anything the FSSC says.

The FSA takes little, if any, notice of anything the TSC says.

The FSA has statutory immunity from prosecution under the FSMA 2000.

The FSA has its man in Parliament in the form of Mark Hoban.

The FSA ignores totally the provisions of the Stautory Code of Practice for Regulators, as drawn up by the Dept. for Business Enterprise & Reform back in 2007. The only body to which one can address any complaints about this is the FSA (and God knows I've tried all other bodies).

So what do you suggest we do Philip Melville? We're boxed in and buggered whichever way we turn.

Phil

Where you would like to be is a far cry from where you are.

The regulators told me they wanted the FSCS funded in advance, they say the industry thought they could manage their own money.

You are where you are because of poor 'representation' and the flawed merging of regulators.

As far as paying for the acts or omissions of others is concerned I am quite sure other IFAs would hate to pay for any of yours if you went out of business due to the burden of regulation and a static or falling income as one or two others who spend most of their time on these blogs have of late.

@Evan,

Not sure how you think you know where I am or why it is important in the context of this issue.

Evan, There are no points to be scored in sniping at Phil Melville. Keep to the script. He is trying to tease out a plan of action.

" You said: The regulators told me they wanted the FSCS funded in advance, they say the industry thought they could manage their own money".

Perhaps its time to revisit this. I suggested above a point of sale levy (applied like VAT) which would relieve IFAs of these unwanted levies and satisfy the regulator's preference for funding in advance.

Discuss.

I assume everyone who is commenting onthe unfairness joined in the recent legal action to challange it? But I doubt thats a safe assumption :(

Whoever you are I can confirm that I wasn't sniping at anyone in particular.

The issue lies with all of you, the regulated and the regulators.

There are fundamental problems in the advice chain and unless someone comes up with a workable solution all we will see is the reinvented wheel, time and gain.

I said we have a plan, it is probably not what some of you would like to see happen but we believe it would work for one simple reason, it has been designed to work from the bottom up instead of the failed top down approach.

"From the bottom up" sounds like you are singing my song!

I expect you mean the investor will pay at the point of sale and the IFA will remit the payment to the FSCS?

As i understand it is a % of the amount submitted on the 2010/11 tariff data on annual eligble income (investment intermediation). I work the % to be about 2.5%.

This is not an increase on your annual levy - it is in addition to the annual levy. I'm guessing you shoudl all have had the most recent tariff questionnaire asking for the latest tariff data - this information is what you annual levy will be based on and probably next years interim levy for the Clarkson Hill failure.

Exactly - those who (ideally pre) pay (explicitly) any protection levy should be those who stand to benefit - i.e the consumer, and/or the providers who are able to shift more product because of the fact of protection (including the intangible product of advice if protection is required for that as well by the consumer beyond the Pi policy).

All the solutions bandied around boil down pretty much to this same principle. It works in almost every other industry you care to mention - travel, car 7 other goods warranties etc. etc

Financial products and/or advice are surely not really any different in principle? But please, lets make sure we give CONSUMERS the choice: To pay more and be protected, or to pay less and take the risk yourself. Its such a simple solution to work out surely if you accept the fact that it MUST be paid for and that consumer choice should apply.

Well said Paul, but the FSA has decided the consumer has no choice in this - protection is compulsory, as is the cost of it.

We just have to find an equitable way of passing the cost to the beneficiary. The product providers can do it in product pricing. Under the RDR we will have to add it to our fees. The question is how?

I have suggested a levy operated in the same way as VAT is added at the point of sale i.e. Investor Protection Levy.

The regulator is all for transparency, so will not oppose an itemised invoice showing FSA levy, IPL levy, VAT etc. The FSA and FSCS are both likely to be supportive as they would prefer a form of pre-funding anyway.

If the FSCS is willing to engage I suggest they contact Alan Lakey who appears to be emerging as the main representative of the IFA (and possibly our only hope!)

Come on Evan share your plan, I am sure the FSA will be pleased to consider it and close it down before RDR i simplemented.

As for the failed action by Regulatory Legal, it was always bound to fail, thus contributing to the costs would have been a waste of money. You cannot trust the courts to go against the established " wisdom "of the regulatory bodies.

Paul Harding - Financial advice is different from other consumer products as it has been mainly commission led, which however has had a positive effect on growth of the retail investment sector and the growth of protection products. The sledgehammer being now used to destroy the IFA sector has nothing to do with the rights and wrongs of commission stuctures, they could have been easily modified to be more transparent and fairer to the "customer", I hate that word, but there you are we all have to accept the FSs definitions. The commission system was not wrong, it was flawed and the flaw was the influence providers put on to adviser to get their products on to the market and "sold" to all and sundry. The Integrity GTEP plan is an excellent example of a product, which when launched was already doomed to failure because of market conditions prevailing at the time of launch, we had barely recovered from the effecs of 9/11.

The diffrence between F A and other consumer products is that the client cannot see a certain outcome, when buying a car, you can get in and drive away, buying or investing in a financial product, what do you have as a tangible asset ? A piece of paper that can become worthless if the provider goes bust or as in KIS instance, some crook steals £100 million of investors money and does a runner (alleged died indeed)

One of the principles the FSA lays down (as per RO1 exam) is that one of the principal tasks of an adviser is to protect capital.

Too many of us, place a client into funds which can only be described as medium to high risk, such as allegedly cautious managed funds, what a misnomer that is. They are vulnerable to market forces and we know they can be volatile.

There is a vast gaping hole in the systems we use to provide advice on products and services, which can only be filled by competant, prudent and sensible investment advice, which by past record can be seen to be so.

We have forgotten how to use our brains and our own knowledge and experience and put our trust in Risk Assessment tools, product research tools and planning tools on computers. We need to get our industry back to basics and stop selling complex financial instruments and products to the majority of unsophisticated consumers, who don't know their a----e from their elbow in financial matters.

IF the industry sees that IFAs are not going to sell complex products, they will stop producing them. Every week we see a launch of a super duper, all singling wonderfully potentially profitable fund (based on criteria I would not use to calculate how much cat food my moggy needs each day).

We get duped into thinking these instruments are understood by our clients, but it rare that we understand them.

I am afraid that for the majority of IFA firms the RDR will spell the death knell of their businesses and if you have a chance to get value by selling your business, you may be well advised to jump ship now and get as much as you can for what you have probably spent 20-30 yrs plus building up, because once RDRs commission ban is in force, renewal and trail commission will come under attack and subsequent devaluation of a practice will result.

I'm not even going to consider 20-30% fall off rates, if RDR becomes a reality those who are left wil be around 50% after the first year of RDR implementation.

Have you noticed that the FSA has not publicised or presented their case to the consumer, now the FSCS, they have an excellent proposition on the telly.

So what next/

A Quiet glass of wine with dinner, maybe a film on the TV and put my feet up. What could be better.

@ Alan Kirkham

I did pay £200 Alan yes. I thought the chances of victory were slim, but we need to be able to gather support when a challenge is being made, not belittle someone who is trying. We desperately need an IFA champion, AIFA and the PFS need not apply....

good points all NEd - but i still think tangible PRODUCTS can be prefunded and paid for (the "insurance" principle applies in many financial product areas of course) by those who benefit.

And as for protection in resepct of the intangible "advice" element on top of product protection - arent legal and tax advice intangible too? Is there an FSCS equivalent covering that beyond the firms Pi cover? Im not aware of one (but dont know so would be glad to be corrected!) If not though, then what is the logic for uniquely applying this to our small bit of the business world?

@ Evan,

I have just arrived in your part of the world to watch Liverpool demolish Fulham.

Presumably your plan will involve us lot providing you with funding ?

If it helps you can get each of my 29 years accounts online for £1 a time.

We are delighted to have had no increase in our turnover as we are concentrating on profitability which if you get our last couple of years accounts you will see for yourself.

Of course this situation is rubbish but we are were we are and in the end we are probably the best people to find a solution to the problem.

Already I have had contact with enough advisers to see that is no consistency at all in the way these levies have been applied which in itself is a good enough reason to begin talking to the FSA. It is all too easy to assume that they dont make mistakes.

Phil

No football pitches in Snowdonia, they would be playing uphill just like you lot.

If the FSA was willing to pay my expenses I don't see why I should do anything for nothing, I'm sure you will agree that everyone has a value.

Why would I want to see your accounts? Forget about any suggestion that I was having a go at you, I have no right to and what is more I am not interested in individual cases. The burden of regulation is increasing at an alarming rate, even the firms I know who have increased turnover substantially through hard work and have improved profitability through streamlining are struggling to see what the future holds for them.

The levy is calculated using the returns you supply to the FSA and it reflects the mix of business you have declared. I would be surprised if there is any consistency in what has been reported to you but yes mistakes can be made so maybe some analysis is in order. I could ask the FSA and the FSCS to explain it in plain English but don't expect miracles with the current unfair system, we need to get the future regime sorted or else this prison will become your tomb. By 'your' I mean advisers collectively as this is not my personal problem, thank goodness.

Have just spoken to FSA re fees invoice. They have told me the fee for my company is based on figures they asked for this month.

Have not sent them any as far as I know.

They are checking this matter and a FSA team member will call me back.

I knwo things have been busy this month and there has been lots of paperwork but I have no recollection of sending them any data.

How they then issue a bill if they have not had the data puzzles me.

Will keep you posted. In the meantime perhaps everyone should query the figures!!

@ Simon,

We have been talking with the FSA today and have found them very helpful.

We cannot understand our bill and they have given us a breakdown of how they calculate so we are doing that now.

I think it is a mistake to assume that the FSA know what they are doing and I endorse your comment that everyone should check their figures and also carify that they understand the basis on which they are being charged.

PS I am now being told that using the FSA formula we have a arrived at a much lower figure so we are about to e-mail them for a response right now.

For the calculation, one of the problems I have seen is that some folks think Investment Bonds are "investments" but they are "life and pensions" products, so no revenue in these areas counts from the "investment intermediation" point of view. Thus these folks are misreporting and creating their own problem.

@ Eden W.

Are you sure that insurance bonds are not being classed as investments ?

This has to be potty because it would mean that a firm such as ours which in essence only uses OEICS - and only plain vanilla ones at that - are being disadvantaged against firms which use investment bonds with all of their lack of transparenct, commission structures etc etc. provider bias and so on.

Thanks anyway , so off we go on another mission.

Philip,

Insurance bonds, as a Life product, must fall within the Life &Pensions section of the RMAR SEction J declaration, and as you rightly point out this means that firms mainly selling Insurance Bonds will have escaped the FSCS levy just announced.

It does make you wonder how any compensation claims would be allocated if a failed IFA firm had given bad Investment Bond advice - would the allocation of FSCS levies in that case be determined only by the Life &Pensions entry within Section J?

It also makes you consider whether to restructure the business in order to generate as much income as possible as genuine financial planning, rather than regulated activity. It would seem that the dangerous area to be in is product arranging.

@ Paul,

on your last point we have not sold a " product " for 7 years but it does not seem to have made any diffrence in this context

Dear Phil,

I do hope you are not thinking we are Bond Salesman - we are 80+% pensions and a bit of Protection - just not much ISA or OEIC business in recent years, so even our fund-based (which applies on nearly all investments) doesn't attract much liability in this case.

Once again we, who live in this industry, can see how the drafting of rules encourages the wrong behaviour. You, having built something, which (with the clear proposition and regular reviews you will undertake) was mostly RDR-ready when rdr was just radar with the a's missing.

It is not right - none of it - the definitions used, which put Keydata in our space, just seem completely bonkers. The Court Case may have been poorly founded but, when I paid my £250, I didn't know that - and would frankly never have imagined that a "product provider" (even FSCS say that) could be put in my lap, where Keydata could never give retail investment advice to the client or (in my mind) intermediate on the client's behalf with providers.

We lack association and representation, despite AIFA and PFS (to be fair IFP don't seem to have such a role at all). When I was a salesman for an insurance company, I had a Union to represent me to my employer AND the LIA to represent my place in the industry. Now, I seem to have neither but pay a lot of people for other stuff, some of which I think should include representation - AIFA definitely should.

With a lot of respect due to Evan Owen from years past and (probably - as I have not met or corresponded but see good things) Alan Lakey now, do we need to give Alan (or someone else we "elect") some dosh to form a Union and represent us (the dosh being to replace lost IFAing income)?

didnt you say - "a firm such as ours which in essence only uses OEICS - and only plain vanilla ones at that "

OEICS are the "product" therefore??

...and of course because investment servicing income still counts in section J

Advising and arranging are regulated activities, where do 'products 'come into it> All the manufacturesr are described as 'product providers'. Not sure why the FSMA deems a life office bond to be an investment yet the rest of the EU does not.

It has been suggested that in theory you could have say 65,000 'clients' who pay you a fee for 'planning' without the need for the regulatory burden.

The regulators and the legislators lost the plot long ago, who could describe a Holloway PHI contract as an investment?

Interesting that Phil has worked out that his bill should be much lower, I hope he is right.

I have been looking at a couple of files, lousy advice, one claim is £750,000 and the other is nearly £1 million. No 'products' in sight! The firms don't have a leg to stand on because of their unquestioning faith and reliance on computerised 'profiling', I predict that there will be many more like this. If (when) they go under this lot will hit the FSCS or whatever the next system looks like. Do you want to pay for that too? Well you don't have a choice, you must pay or follow those firms down the pan, one day there might just be one firm left!

What has regulation done for us?

Dont be so weary Evan ! This is just another hurdle of which there have been many over the past decades. Dig in and fight back - the opponents are not that worthy anyway.

@Eden & Paul,

We also paid our dosh to Gareth.

I have no issue with how anyone else earns their living but I do need to know how our own " new improved RDR version " is going to be treated before we go much further.

Seems to me like this might just be the window of opportunity that was

needed to spark off a fight back - just as is happening in Tunisia and Egypt as we speak.

Please dont let us " divide and conquer " as the mantra.

I guess some of the more recent posts around this subject highlight the reasons we are unable to create a sustainable and coordinated challenge.

We are a very divided industry and although many like minded poeple are raising their voices there is no single forum to be heard. Sniping and in fighting continue to create a dissillusioned and very disparate group of advisers - when is this going to stop and how are we going to move things forward?

Totally agree Philip. I think if decent IFAs cant come together on this one, then it will never happen on any subject.

Perhaps Martins open letter will be a good start?

http://www.icl-ifa.co.uk/fscs-interim-levy-open-letter/

....but who will coordinate beyond that ?

There is common agreement here that some body or organisation has to represent the IFA. Realistically there is no chance of setting up a new structure this late in the game.

I am currently deafened by AIFA's silence. We need to get an established body with clout to stand up for the IFA community. Is there any statement of intent from AIFA or do they have a "mission statement"? Or the PFS? Shouldn't we start by asking these organisations where exactly they stand on this issue in particular. I am sure that some contributors with more history as an IFA than I have (Phil Melville et al I'm looking at you!!) have contact with the heads of these bodies. Can't we have a statement from them at least?

Shouldn't they be concerned that this levy may force some IFAs to break capital adequacy? Isn't anyone alarmed that the costs will be passed on to the consumer? We have already discussed moving our trail to 0.75% on FUM. Not because of greed, but purely as a response to where we are now.

So come on, who knows anybody on the board of the PFS or AIFA? What's Ken Davy got to say about it? He seems to always judge the mood of the IFA quite well and let';s be honest has been successful in this community. It's who you know, so come on guys and gals, who do you know? (Anybody related to McHoban need not reply).

Perhaps Citywire can coordinate on this and allow us all to make some progress towards sorting out this mess.

We do need to ALL get involved - large and small business's alike.

In total agreement Phil, we clearly cannot rely on AIFA to represent us, totally discredited now and judging by the number of replies and the emotions expressed here, Citywire is successfully focusing attention within the industry on this major issue. Precedents , once set are difficult to overturn so we cannot simply resign ourselves to more of the same.I am certainly ready to "sign up" to your suggestion, I hope Citywire are up for it.

Have just had a conversation with a gentleman in the invoice department of the FSA.

After being told by someone at the contact centre that the information was requested from us on 13 January this year, I am actually told that the data was from an email sent to firms in January 2010!

So I now know that the income figure is actually based on my earnings of 2009, and not 2010 which will be lower then the previous year.

So the levy for 2010-11 will be based on that information. They will be sending me the formula so that I can see how it works.

So do I now charge fees for generic advice, and not for both advice & product solution as is now.

Then as Phil M says how ready is our RDR planning if we now have to consider our income for levy purposes.

The formula is very easy according to the invoice department.

The total levy to be raised for the sub-class is £92,673,117.00 (A) and the total annual eligible income for all participant firms is £3,701,380,911.00 (B).

For example.

The levy is calculated by: (A) divided by (B) multiplied by the firms tariff data

= (A)/(B) * £43,375

= £1,086.00

The FSA must have data to which companies recommended the Keydata plans, and therefore why could they not levy the charge more on those firms as they have made money on selling the plans. My company has not, but expected to pay my share.

This is clearly not fair and makes you think perhaps we should make an effort to participate in the next Keydata saga, whatever it may be!

Useful to have this Simon but the point is not HOW the FSCS distributes this across our sector but WHY Keydata were included in our sector in the first place. It also begs the question, what other companies are classified alongside IFAs and what lies in store for us in the future as a result.Finally if what I understand from earlier postings is correct, can anyone explain the logic in having product types included or excluded for levy calculation purposes based essentialy on their tax treatment?

To Angela Maher ~ I have raised this question too. The losses arose as a result of the failure of LifeMark, the provider. If KeyData was only the intermediary, then it would have had no client assets under its control, other than monies pasing through its (legally separate) client account en route to LifeMark. Ergo, the failure of KeyData cannot have been the cause of any client losses.

But the FSA engineered things in such a way as to classify Keydata as an intermediary and thus dump the bill for the failure of LifeMark, the provider, on the IFA sector. It doesn't stand up to scrutiny. But then most of what the FSA does doesn't stand up to scrutiny, yet still it gets away with one travesty after another. Questions on such issues are routinely brushed aside, fobbed off or simply ignored. And that's healthy regulation? I hardly think so.

Labour created this monster, cut it loose from accountability to anyone and now the very same party is calling for the FSA to be more accountable to Parliament. It all stinks.

Hope you have registered for the campaign Julian.

What is hard to understand is why discretionary managers have been hit by a significant levy for the Key data incident (as well as Pacific Securities and Wills and Co due to LSE members really) yet their categorisation for this purpose couldn't be any further from the main thrust of the relevant income. Surely, had we sold KD products the income would have been insurance or Unit trust or such product commission (we didn't sell any though, very dubious about them all and we don't sell such products anyway) and that should be the income that the FSA targets for the levy and of all financial advisers not discretionary managers?

@ Philip Milton -the whole means of calculation and assessment for the levy is unfair - many of the contributors here have never sold Keydata policies or the like - all in it together and tarred with the same brush - all we can do is try and coordinate a response to prevent this from occuring in future. I hope you will join the fight

To Philip Milton ~ There's no logic to any of this. It's just the FSA's next step in its campaign of carpet-bombing the IFA sector into oblivion. In the face of the FSA's statutory immunity from accountability of any sort to anyone, "The fight" will be as futile as all those before it.

@ Philip Milton

Echo all previous comments about how daft the whole system is. But the specific reason your category got hammered was I think because there is a limit to how much we get hammered with in our category - I think its £100million, so any excess flows over to another category, yours unfortunately in this case. (It might be handy for us IFAs to know if we would ever be the recipients of an overflow from any other category?!?! - altho as we seem to get things placed in our category that dont belong to us in the first place its prob a moot point!)

I think the best way to think of it is like the watertight compartments on the Titanic, which simply overflowed to the next one when full. There are clearly some shared design elements and the ship was of course unsinkable remember.