An IFA has called for claims management companies to be regulated by the Financial Conduct Authority, warning that the whole regulatory system needs to be overhauled as the current claims culture is the “greatest danger” to the advice process.
Martin Evans, IFA of Newport-based Prism IFA, believes it needs to fall under the FCA remit to allow the regulators to issue sufficient punishment if they do fall outside their remit. He cited cold texts and cold-calling as examples of “appalling” behaviour.
Mr Evans said: “They send texts and make calls, forcing people to believe they are entitled to a PPI refund. If I contacted prospective clients like that, the regulator would come down on me, so why not them?”
According to Mr Evans, the current claims culture is the “greatest danger” to the advice process and is “unsustainable”.
He said: “The whole system needs to be overhauled and the issue of a legal long stop, regulators, the Financial Services Compensation Scheme and the Financial Ombudsman Scheme needs to be addressed as soon as possible.
“The government and the regulators seem to be pinning all their hopes on simplified products. This method has already proven ineffective.”
This follows on from calls from Neil Liversidge, IFA and Association of Professional Financial Advisers’ council member, for regulated CMCs to de-authorise and then be forced to re-apply under far stricter criteria.
In a series of letters to the Ministry of Justice, seen by FTAdviser, Mr Liversidge says CMCs are encouraging fraudulent claims in cold-calls to potential customers.
In one example, Mr Liversidge claims a CMC firm which cannot be named for legal reasons works with a firm in India whose sole objective is to “coach” potential customers what to say to CMC firms.