Damian Fantato  

Advisers should support FCA crackdown on CMCs

Damian Fantato

Damian Fantato

There are probably advisers out there who think being involved in a claims management company is an original sin – a stain that cannot be washed out.

But the truth of this matter is somewhat more complex and it is in advisers’ best interests for there to be a well-run CMC sector.

One of the concerns expressed by the Financial Services Compensation Scheme recently has been that advisers who mis-sell investments close down their businesses and reappear as CMCs – a process known as ‘phoenixing’.

This allows them to take two bites of the cherry: earning money from the original mis-selling and again from acting as a CMC in the complaints process.

Advisers are affected by this because, firstly, the mis-selling itself damages the profession’s reputation and, second, the number of unhappy clients while the claims process pushes up their levy bills – and of course these claims could not take place had there been no mis-selling to begin with.

And this is before we consider the CMCs who did not start as advisers, but who just wish to profit from mis-selling.

For some advisers, it might not come naturally to support the Financial Conduct Authority in the execution of its work, but there is good reason for them to do so when it comes to the crackdown on CMCs, which the regulator is currently embarking on.

Having taken on responsibility for regulating CMCs in April, the FCA is now going to start sifting through the companies that it has given temporary permission to continue operating.

If it succeeds in sorting out the wheat from the chaff then advisers may well benefit from happier clients, lower bills and a profession with a better reputation.