RegulationDec 9 2015

Apfa pushes for FSCS product levy

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Apfa pushes for FSCS product levy

Today (9 December) the Association of Professional Financial Advisers has called for a fundamental reform of the Financial Services Compensation Scheme levy structure, with its request for the introduction of a product levy.

The organisation said as part of its engagement with the Financial Advice Market Review and in anticipation of the Financial Services Compensation Scheme funding review, expected to take place after FAMR, it has published its position paper on FSCS levy funding.

Apfa said that its recommendations aim to create a fairer and more sustainable levy system whilst also protecting consumer interests.

The organisation added that it calls for a fundamental change to the sytem with the introduction of a product levy.

The trade body said the FSCS could set out a small surcharge for difference product categories with a levy attached to the income for the transaction and sale of a product, added to its price and paid for by the client, and that higher levies could be charged for higher risk products.

Additionally, Apfa has also called for a change relating to the extent and level of FSCS compensation, advocating the creation of a ‘whitelist’ of product categories for which FSCS compensation is available and a cap on compensation levels.

Chris Hannant, Apfa’s director general, said: “A product levy is a fair and workable solution. I believe it is the most equitable way to fund a compensation system as it does not penalise innocent firms, allows financial stability and also drives better outcomes for consumers.

“In the context of FAMR, this is the right time to consider what is the right scale of redress. The current system has a tendency to compensate consumers who have invested in high risk products at the expense of those who have chosen lower risk ones.

“Creating a ‘whitelist’ of products and capping compensation levels would not only promote greater consumer responsibility, but would also lower the overall costs of adviser firms, increasing accessibility of financial advice to a wider market and make a significant step towards the aims and goals of FAMR.”

ruth.gillbe@ft.com