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View the article online at http://citywire.co.uk/wealth-manager/article/a746550

FSCS levy hike reignites debate about how costs are apportioned

by Elsa Buchanan on Apr 23, 2014 at 10:26

‘I think the WMA’s point is completely fair, and I couldn’t be any more robust in my endorsement of their statement,’ he said.

‘Everyone in the industry wants to protect investors and the existence of an investor compensation scheme is good for us, but I would completely take the point about protecting investors outside of their jurisdiction.’

While he explained transparency is improving under the new model, Macdonald said more needs to be done regarding how the scheme is allocated and its sum in advance.

Compensation mismatch

The WMA’s view on the mismatch between the allocation of eligible income and compensation charges is reiterated by Colin McInnes, managing partner at Quartet Investment Managers.

While he considers the levy ‘is just the cost of doing business’, he is calling for a higher degree of clarity on how it is being spent.

‘We’d like to know how it has been calculated, and we think it should be a forward-looking number. Are they continuing to see an expectation of payouts? If so, on what basis or how? That would be helpful,’ McInnes said.

While Quartet typically budgets its balance sheet capital on the basis of the previous FSCS bill, plus factors such as inflation, the managing partner said he would appreciate a better knowledge of what his firm ‘would be in for’.

‘[After calculations] we’re not ever right but we’re not a million miles off.’

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