The FCA is still pondering the merits of a product levy as part of its Financial Services Compensation Scheme (FSCS) funding review.
In a letter to Treasury committee chair Andrew Tyrie, published on 30 October, FCA chief executive Andrew Bailey said its priorities for the review included “smoothing firms’ levy contributions” through merging funding classes, and “the possibility of risk-based levies related to the products or services a firm offers, its capital reserves or complaints reported”.
While the introduction of a product levy is unlikely due to the fact it would require legislative changes, Mr Bailey’s letter added the watchdog was “considering” the suggestion as part of the consultation.
SimplyBiz chairman Ken Davy is among those to have been vocal about which steps the FCA and the Treasury should take as part of the funding overhaul. Writing to them in a paper entitled: Funding the Financial Services Compensation Scheme, Mr Davy highlighted “grotesquely unfair” practices such as costs falling “entirely on the advice sector”.
He believes it is impossible for advisory firms “to be aware of a problem firm in the same office block, let alone the other side of the country”.
Proposals for changing the structure of FSCS funding first emerged in the FCA and Treasury’s Financial Advice Market Review (FAMR), launched at the end of last year.
Mr Davy suggests that the fairest option for the FSCS in future would be a product or provider levy, which he claims would have “all the same benefits” as the existing system.
He continued: “A risk-based product levy in advance [is] almost impossible to define, and would become very subjective. But a product levy would have a tiny impact on product providers if it was related to their sales [because] the amounts in any individual case, for any individual client, would be very small.
“The bulk of the FSCS liabilities should fall on the product providers with a modest contribution from the IFA sector itself.”