I make no apology for returning to the subject of the Financial Services Compensation Scheme (FSCS), as the deadline for responding to the Financial Conduct Authority's (FCA) consultation paper is the end of January.
In particular, I think some recent comments by Mark Neale on the FSCS levy merit wider attention. His role as chief executive of the FSCS gives Mark daily exposure to the problems created by the failure of firms to meet their obligations, while his background of working at the Treasury also gives him insight into how taxation works. This is important, as he is very clear that the FSCS levy is nothing less than a tax on the financial services sector.
To address the issue of how the total can be reduced, we must find a way to minimise the harm that reckless or dishonest practices can do. Clearly their fellow advisers have virtually no chance of either spotting or stopping it, so who, apart from the regulator, does? Enter the product providers. No other group has more knowledge of the day-to-day activities of the advice market than providers.
I believe that through the ABI they should set up a clearing house to pool information about dodgy advice firms. This unit could in turn alert the regulator to their concerns so that firms may be asked by the FCA to explain their behaviour and, if necessary, swift action can be taken to stop further consumer detriment.
Of course, this will not happen unless providers have a direct and significant vested interest in reducing the total amount of the levy, and if they are liable for the bulk of the cost. Nothing could be clearer: if providers are responsible for paying most of the levy, consumer detriment and the levy will reduce, as reckless and dishonest advisers are caught more quickly.
Before anyone complains that this is unfair on the providers, I would point out that for years advisers have had the whole of this tax unjustly dumped upon them.
Mark Neale also highlights that 84 per cent of consumer claims never reach the FSCS as they are already paid by advisers and/or their professional indemnity (PI) insurers, and that tax is better levied on deeper pools than shallow ones. So well done Mark, and I will let readers of this column determine whether advisers or providers are the deepest pool.
Ken Davy is chairman of SimplyBiz