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Tenet hits out over 'reckless' £150m FSCS threshold

by Michelle Abrego on Feb 01, 2013 at 11:40

Tenet hits out over 'reckless' £150m FSCS threshold

Network Tenet has hit out at the Financial Services Authority's (FSA) funding proposals for the Financial Services Compensation Scheme (FSCS) calling the move to increase IFAs' levy threshold to £150 million ‘potentially reckless’.

Earlier this month, the FSA rubber stamped plans to increase the FSCS levy threshold for investment intermediaries to £150 million from £100 million.

In its funding review of the FSCS the regulator rejected a pre-funded model, a product levy, or reorganisation of the funding sub-classes.

Tenet group distribution and development director Keith Richards, said: 'It is potentially reckless to continue with a model so clearly flawed and ignoring many of the concerns and alternative solutions offered when there is a chance to remedy the problem. 

'Tenet has asserted for some time that the entire regulatory and compensation funding programme is at risk of destabilising its own foundations and that the unfair burden continues to be placed on the intermediary sector.'

Tenet advisers have been active in lobbying their local MPs over the past year in support of a fairer compensation levy.

15 comments so far. Why not have your say?

Mr Man

Feb 01, 2013 at 12:03

Why shouldn't the IFA market pay for its own past and of course future indiscretions. There is a lot more massive scandals to be unearthed and you shall all quite rightly fund the cost.

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Charles Rickards

Feb 01, 2013 at 12:11

It would be interesting to know how much compensation has been paid out by the FSCS as a result of IFA wrong doing? Then perhaps we could see whether it is fair or not. The FSCS needs to be funded by a combination of product levy and industry levy. No other industries provide such openended guarantees at no cost to the consumer.

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Green Eyed Monster

Feb 01, 2013 at 12:15

@ Mr Man

IFAS are quite prepared to pay for their own mistakes (through direct compensation and PI insurance).

They are also (albeit reluctantly) prepared to pay collectively for the mistakes of their IFA colleagues (through FSCS levies).

Do you think it is right that they should also pay for the mistakes of product providers (for faulty products, fraudalent management etc), spread betting firms, credit unions etc?

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Jenny N . I FA

Feb 01, 2013 at 12:17

Is this a real comment Mr Man or is this someone at new model wanting a huge amount of abuse online?

Why should we pay for other peoples mistakes. If we should, then why are we all so heavily regulated and why do we make sure our compliance is near perfect to protect us and our clients. So why should the good suffer for a few baddies. If we have to pay anyway then perhaps we shouldn't bother to do things right.

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Paul Barnard

Feb 01, 2013 at 12:18

I can only assume that Mr Man is trying to be deliberately provocative rather than demonstarting any inate stupidity? If "the IFA" market was a homogenous lump then he may have a point; we are not and I object most strongly to paying for someone else's indiscretions.

If my neighbour popped round asking for help to pay his speeding fine with the logic that I was a fellow motorist, then I could only assume that he was as ignorant as Mr. Man and tell him where to go.

Also, if you use the plural "scandals" then the correct conjugation of the verb "to be" is are, not is.

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One is afraid

Feb 01, 2013 at 12:38

@Paul Barnard

You is well right, innit

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BMcQ

Feb 01, 2013 at 12:40

Let's not forget that we all benefit from FSCS in terms of the added consumer confidence. I think it is right we have this 'safety-net' and that we all contribute.

I believe the original intention of sub-classes was to protect smaller firms like IFA's having to pay for the indiscretions of bigger entities like the banks, but when we have to pay for the collapse of Keydata, which was clearly a product provider, then that seems to be totally illogical. So I am dismayed by the refusal to reconsider the sub-class division or the definition of ‘intermediary’.

I also don't like the idea of a pre-funded model or a product levy but probably for different reasons to those of the FSA. Both of these models would hand money to fairly unaccountable body which will find all sorts of way to spend it. Regulation costs far too much as it is, let’s not add a penny extra to the cost.

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Smithling

Feb 01, 2013 at 12:49

I think Mr Man is trying to wind us all up.

Because nobody is so pig ignorant as to honestly believe what he just said.

Newcomers to the industry, with all the new qualifications, none of the historical bad habits, none of the liability, none of the previous gravy train earnings... you think they should be paying for the advisers who have been taking the p**s for the last thirty years with beer mat qualifications and no idea what they're actually investing in?

Don't be ridiculous. Mandatory and comprehensive Professional Indemnity cover that is sufficient to cover all the advice you've given personally.

Simplez.

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madmitch

Feb 01, 2013 at 13:14

I think that Mr Man actually has a point.

Many IFA's have over the years done much more harm to clients than good, the problem we have is that by the time this harm has come to light the culprits are no longer practising, and PI may not have covered the losses in any case.

The speeding anology is not really a good one to compare to the need for the FSCS, but keeping on a motoring theme, we all pay a bit towards the uninsured driver scheme, whether we like the idea or not.

I also get the feeling that the IFA sector gets very little sympathy or support from the powers that be, because it is generally felt that twe provide very little value for the fees that we charge. We may well beleive that this is not the case, but in reality advisers charging 1 - 1.5% annual fees are doing so because they can, not because of what they offer.

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Bob Donaldson

Feb 01, 2013 at 13:29

@ BMcQ - If individuals need the comfort of the financial services compensation scheme for them to invest then they should not be investing. No one should invest unles they can afford to lose money be it on a house, fine wine, stock market, gilts or whatever.

The compensation scheme should be there to cover miscreants not fraud not theft not companies that phoenix etc.

Listening to the news today, regarding the Police Complaints Commission, I was astonished at the amount of complaints. 1 in 4 policeman was the number.

This is the old chestnut, if the complainant has nothing to lose why not complain. This is the same in financial services.

We need to have a fairer and more equitable system and the only way to do that is for a levy on products to cover the scheme. Thus the public are covering their own back.

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Smithling

Feb 01, 2013 at 13:31

madmitch

So if they're no longer practicing and they are found to be negligent in their retirement then go and destroy their pensions and seize their home and possessions.

Why the hell should I pay for some bloke that took backhanders for decades. They have got all the benefit and it's up to me to earn a third as much, while doing a better and honest job, while compensating his clients?

Forgive me for feeling that somewhere along the line there is an imbalance there.

Oh and with all due respect, you may not feel that you deserve your 1-1.5% annual fees, but I work damn hard for my 0.5% and certainly "earn my bread".

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Paul Barnard

Feb 01, 2013 at 13:35

Indeed Madmitch. What services do I offer clients who pay 1% er annum?

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Green Eyed Monster

Feb 01, 2013 at 13:36

@madmitch

I can't quibble with a lot you say but two points arise:

1) We have very little sympathy or support from the powers that be due to the lobbying by product providers behind the scenes for many years. We are tainted as being leeches, when in fact we are saving our clients many thousands of pounds by the filtering process of our services. Product providers do not like to see their products sidelined and getting direct to the public would be preferable that being subject to an IFA's approval. There has never been corresponding lobbying by IFAs or their representatives, because we did not recognise the need. We felt that we were doing an excellent job so why should we not be supported?. The reality is that we have been a thorn in the side of many banks, life offices etc and so all they can do is try to discredit us- and they do! . We are still around because we do a good job, and clients know it! The powers that be find that difficult to swallow.

2) Any adviser not offering a service commensurate with his/her fee will soon be found out and will not survive.

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Richard Hardy

Feb 01, 2013 at 16:40

@ Mr Man:

The IFA sector does pay for its errors through its PII and excesses funded by each firm.

The majority of claims through the FSCS are as a result of poor regulatory or Government policy and the indiscretions of the larger firms and institutions where no one is accountable as the FSA is unable to identify them.

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Julian D

Feb 01, 2013 at 17:46

I saw a client today and as a direct result of my advice he'll save £22,000 in income tax this year alone.

I'll repeat that SAVE £21,000 IN INCOME TAX!!

Without my intervention and knowledge he would have gone on unaware of the opportunities of tax planning through pensions.

I say all this as he doesn't give a monkey's about my costs, whether they are 3% upfront plus 1%pa, or 0.5% & 0.5% (respectively), if the advice I give him makes him financially better off with all of the ocsts taken into account, that's what we're supposed to do.

We seem to forget that and all harp on too much about what everyone is charging. It's the net benefit to the client that counts and as long as we can all look at ourselves in the mirror (and also prove the validity of the advice to any compliance officer/FSA employee) without feeling guilty, then we've done a good job.

Those that think good advisers should pay for the mis-selling of bad are wrong.

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