Brokers and advisers who are not licensed to sell pension products have said that the Financial Services Compensation Scheme (FSCS) is unfair.
A survey of 62 directly authorised advisers found 93 per cent believe the levy, which funds payouts to consumers who have been wrongly advised, is unfair to those who do not sell higher risk products.
This is because advisers who give advice on life products, often sold by mortgage advisers when clients are buying a property, are classed as offering the same service as those who advise on pensions products.
“It’s unfair that the FCA is holding mortgage brokers accountable for the poor advice of others. We’re not licensed to sell products with an investment element so we shouldn’t have to pay into a pot to bail out brokers who do," said mortgage broker Stephen Brockman at A2B Mortgages.
“"The levy should be split to account for the difference in low and high risk products. For instance, it could be divided into two sub-sections; one for non-investment product sellers and another high risk one for sellers of investment products and pensions
"Firms would then be charged fees according to the type of product sold and the level of potential risk. This currently isn’t an option, so all in the industry that are affected by this need to make their voices heard."
The FSCS announced earlier this year that it was introducing three supplementary levies to meet the high costs of compensating customers who had been wrongly advised to advice to switch pension their funds into high risk investments.
The scheme had previously warned that there had been an increase in claims related to SIPPs, and said that four advice firms accounted for 73 per cent of all the claims that it expects to pay out.
Mark Neale, chief executive of the FSCS, said at the time that he recognised that the levy affected financial firms.
“The financial services industry funds the protection we provide. We recognise the costs impact on firms. That’s why we’re concentrating on reducing our overheads and constantly seeking value for money in our work," he said.
The Financial Conduct Authority (FCA) announced in December that it is consulting on the future funding of the levy, including the possibility of changing the funding classes for contributors and exploring the potential for FSCS levies to better reflect the risks posed by particular practices.
“We want to ensure protection for consumers and fairness for firms that pay for the compensation," Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said.
David Copland, director of TMA Mortgage Club, which carried out the survey, urged members of the club to respond to the consultation on the changes, which closes on 31 March.
"The majority of our advisers are not licensed to sell pension related products, yet they are consistently penalised and required to pay for poor advice given. The only way we can make a change is by sharing our views with the FCA,", he said.
