The director general of Apfa said although he was concerned about the latest Financial Services Compensation Scheme bill – which came in at £105m for 2014/15 – he was optimistic that in the long run advisers would avoid paying an interim levy, as has been the case in previous years.
Mr Hannant said: “Under the new 36-month funding approach, the levy comes out at £105m, whereas under the original calculation looking at the coming 12 months it would have been £76m.
“However, we hope that the long-term situation for advisers might not be as bad as this headline number suggests.
“Under this new approach, the FSCS is more likely to ‘over-levy’, removing the need for an interim levy next year and should mean some of the following year’s levy is paid in advance. All of which should, in the long term, smooth payments.”
However, Keith Richards, chief executive of the Personal Finance Society, has warned advisers they shouldn’t expect any guarantees from the regulator on fees.
Mr Richards said: “Apfa have made a considered and valid observation which could be correct but I doubt advisers will get any guarantee from the FSCS.
“Either way, the increasing cost and financial impact on adviser firms is unfair and unsustainable in my view and calls for a radical review are required.
“The current compensation funding strategy is not fit for purpose not least because of how much has changed regarding the shape and size of the overall financial services market since it was first implemented.
“Retail financial services clients in the UK arguably benefit from the best protection afforded by any FS market around the world but it is becoming increasingly reckless’ to continue with a Financial Services Compensation Scheme funding model so clearly flawed.
“The current FSCS funding strategy is ‘unsustainable’ and poses as much of a threat to consumers as it does to the advice profession.”
Background
On 21 January the FSCS revealed that advisers in the investment intermediation sub-sector will be hit with a bill of £105m in FSCS levies for 2014 to 2015, an increase of 38 per cent.
The FSCS blamed the bill on redress over collapsed firm Catalyst Investment Group.
Total levies across all sectors were proposed to hit £313m, up from £311m during the previous financial year.
David Penny, managing director of Somerset-based Invest Southwest, has called the FSCS levy “one of the many barriers to entry into the advisory community”.
