Insurers squirm while FCA proposes fee shake-up

Pay more, pay less

On Thursday (31 October), advisers got a Halloween scare when the Financial Conduct Authority published a consultation paper which, among many other things, proposed a 63 per cent increase to levies used to fund the Money Advice Service.

Terrible news! Ratchets and thumbscrews and the growing burden of regulation! Or is it?

The paper also proposed merging two fee blocks and creating a new one to ensure firms which hold client money - usually the larger ones - would pay more to reflect the generally higher risk.

One outcome of this is that smaller adviser firms which were previously paying about £6.89 in fees per £1,000 of income on average would have their levies cut in half, or more.

According to the proposals, firms which do not hold client money (but which until now have paid proportionately higher fees) would only pay approximately £2.39 per £1,000 of income.

This must be great news for advisers at smaller firms.

On top of that, the amount no longer being paid by smaller firms will be picked up by the firms which hold client money, meaning they finally pay more towards regulation in line with the risk of consumer detriment they carry.

Now to get back to the Mas story above, if these proposals go through the reduced fee structure would also affect how much adviser firms would have to pay, suggesting it might not be as bad as the 63 per cent headline figure makes out.

Viva la liberation?

Insurers found themselves increasingly wedged between the rock of pensions liberation fraud and the hard place of refusing client requests this week when pensions ombudsman Tony King told FTAdviser his office was considering nine cases of complaints against insurers regarding pensions liberation.

According to the ombudsman, who spoke to FTAdviser in order to finally set the record straight, only one complainant argues that their insurer should have stopped a transfer, while the other eight complain that the insurer refuses to follow requests to transfer pension funds.

It’s a tough question: do savers know enough to make the decision themselves if they want to ‘unlock’ some funds despite harsh tax penalties and fees? Or is it the insurer’s job to stand up for client wellbeing?

Adrian Boulding, pensions strategy director at Legal & General, told FTAdviser insurers can legally defer a transfer for up to six months. If HM Revenue and Customs hasn’t done anything by that point however, companies will find themselves in a ‘grey area’.

Moreover, insurers are not even allowed to ‘tip off’ a consumer where they think the scheme is illegal.

It certainly looks like a lose-lose situation for insurers and I wonder if we will see any guidance from the authorities to clear the air.

More fuel in the fire

Could the tide of battle cautiously be turning against claims management companies? After last week’s news that Alan Lakey successfully won a small claims case against a CMC and got them to pay his hourly rate for time wasted (that must have been so satisfying), one contact got in touch with me and drew my attention to an interesting judgement.

Apparently, a judge has ruled that a simple breach of the Conduct of Business rules does not alone give a client the right to compensation.

Instead, the client (or their lawyers) have to demonstrate that the advice they got was unsuitable.

Taken to an extreme example, this implies that even if someone gave advice without being authorised (one of the gravest breach of Cobs there is), if the advice can be shown to be suitable then the adviser would not necessarily be liable to pay compensation.

This is one in the ear for CMCs, who often pick apart an adviser’s process and try to intimidate them into opening their chequebook: “We note you did not show our client the terms and conditions and therefore the product was mis-sold” and what have you.

All the more fuel in the fire for advisers to stand up against bully CMCs.