Levying unfair costs
Financial advisers have a moral and professional duty to pay their fair share of the running costs of the Financial Services Compensation Scheme and the additional costs of compensating clients who have suffered because of bad advice.
But there is also a compelling duty that product manufacturers should also have to carry a share of this financial burden, given that in the main quite often their products are at the centre of mis-selling claims, or the promises they have made to financial advisers are the root cause of the inappropriate advice which have led to complaints.
What is more important, however, is that there seems not to be any rhyme or reason why the levy continues to escalate far beyond the rate of inflation or of any reasonable increase in compensation rates.
At a time when the City regulator is making stronger capital adequacy demands on small firms, to pay exorbitant levy rates at a time such as this is transparently unfair.
For reasons which are not clear, the regulator and its satellite organisations – the FSCS and Financial Ombudsman Service – have obviously taken a whip to IFAs which they are reluctant to take to other firms in the sector, especially banks.
Giving IFAs an opportunity to pay these massive levies on instalments is not the answer.
No other professional group has to provide professional indemnity insurance, a hike in capital adequacy, levies to the regulator and still lead a long trail of responsibility years after they have left the industry.
In fact, in some cases when they try to retire and sell their businesses, the process can be long and painful which only adds to the stress of being over-regulated.
In the case of Fos, when the regulator and the high courts can turn down solid evidence from a notable expert such as Dr Peter Williams on drawdown, then the industry clearly needs a proper explanation of their reasoning.
Are we drifting back towards an era of eugenics to resolve our burgeoning social problems?
First it was an attack on the so-called underclass, then on overweight people, then on those without qualifications, the unemployed, aggressive tax avoiders, now on big families on benefits.
How long will it take before we compulsorily sterilise the undeserving poor, the mentally impaired and other marginalised groups who do not look and behave like us?
And, as a bonus, the consequent demographic shift would go a long way towards resolving the pensions problem, the housing gridlock, the education crisis and the shortage of jobs.
More from Hal Austin
- Pensions and Tax - July 2015
- How to get a grip on pensions protection
- Plan retirement income wisely
- New rules provide tonic for succession planning
Opinion on Regulation
- Get AE out of A&E
- Policymakers must come up with a simplified advice solution
- Government drawdown piggy bank would quieten critics