MP backs adviser stance on reform of FSCS levy
Mark Garnier says “entirely unpredictable” levies place “increasing burden” on IFA community.
The Financial Services Compensation Scheme in its current format is placing an “increasing burden” on the IFA community and is unsustainable, Mark Garnier has said.
Mr Garnier, Conservative MP for Wyre Forest in Worcestershire, said levies imposed on IFAs were becoming “entirely unpredictable” and made it increasingly difficult for advisory firms to operate.
His comments came in response to a survey of adviser attitudes on the FSCS earlier this month, commissioned by online IFA community Panacea IFA, which attracted almost 500 respondents.
The vast majority – 97.1 per cent – called for more transparency and the introduction of a product levy.
Mr Garnier, a member of the parliamentary commission on banking standards, said: “The committee will be looking into the FSCS as part of a wide-ranging review of the financial services industry this autumn. It is becoming more and more difficult for firms to plan for the future.
“Funding the FSCS is a complicated task. With the ongoing increases in levies, it seems to have got carried away with things. I don’t necessarily disagree with collective responsibility as a principle, but the current system is not working.
“We have to stop people breaking the rules in the first place and need to look at the situation regarding incentives and mis-selling.”
Panacea’s findings also revealed that 52.1 per cent thought their firm would not be able to pay an increased levy , while 92.3 per cent called for greater clarity of the levy by specific product type. A total of 96.9 per cent thought the current system used by the FSCS unfairly penalised responsible firms for the malpractice of others.
A recurring response for an alternative to the current FSCS system was to introduce a product levy, while 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 the product levy.
Some 46.8 per cent of advisers polled found the task of breaking down and collating the data for returns difficult, leading to the danger of being wrongly charged by the FSCS, while 70.7 per cent thought any future levy should be part of a mandatory disclosure to the client.
Derek Bradley, chief executive of Panacea IFA, said: “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.”