IFA survey calls for FSCS product levy

Derek Bradley, chief executive of online IFA community Panacea IFA, said its FSCS survey had attracted almost 500 respondents, with 97.1 per cent calling for more transparency in how the FSCS calculated the levy for 2012/13.

A grand total of 92.3 per cent called for greater clarity of the levy by specific product type, while 96.9 per cent of respondents thought the current system used by the FSCS unfairly penalised responsible firms for the malpractice of others.

A recurring answer to the question of ‘which alternative to the current FSCS system should be introduced’ was a call for a product levy.

The survey showed 56.8 per cent thought that if a product levy were set at an appropriate rate, it could also fund the Money Advice Service.

Some 38.7 per cent called for the abolition of mandatory professional indemnity cover to be replaced with similar payments to the FSCS in addition to a consumer product levy.

Mr Bradley said: “Our survey is chock full of interesting observations but it is clear that some perhaps do not understand or appreciate the role of the FSCS as fully as they should. It is the consumer fund call of last resort and although one would always want the bad boys to pay, the system as it stands renders that impossible and the good guys always pay because the bad fail.

“Regarding PI, the inability of some firms to get it is a contributor to them failing and placing consumers by a quirk of unintended consequence into the hands of the FSCS. Perhaps IFA PI cover needs a re-think too.

“A better FSCS solution should be possible but the burden cannot always fall on the IFA who in many cases is often held responsible for advice failures with the benefit of hindsight, and not by intention of advice at the time it was given.”

According to the survey, 46.8 per cent of people found the task of breaking down and collating the data for returns difficult, with Mr Bradley adding this could mean they might be getting charged the wrong amount by the FSCS.

Some 70.7 per cent thought any future levy should be part of a mandatory disclosure to the client so that they could see what the cost of the levy was in actual monetary figures, while 52.1 per cent thought increasing levies could see their firm being unable to pay.

The full survey can be read here.