Let’s start with one important principle: the Financial Services Compensation Scheme is a valuable consumer service.
If we cannot agree on that, then you should probably stop reading now.
I have used it myself, when Icelandic savings company Icesave collapsed in the last financial crisis, and it returned my savings to me swiftly. In all honesty, this was the greatest test the compensation scheme faced, and it rose to the challenge admirably.
Every year it does the same for thousands of other savers, many of whom have found themselves on the wrong end of some pretty dastardly practices.
So yes, let’s start with the principle that it is a valuable service.
But we do need to talk about the levy, because at the moment the burden of funding seems to be too great.
The figures (and I thank Informed Choice director Nick Bamford for highlighting these) are stark.
FSCS levy increases over past 10 years are: +53 per cent, -35 per cent, -22 per cent, +35 per cent, +19 per cent, -16 per cent, -30 per cent, +24 per cent, +28 per cent, and +58 per cent.
How on earth can any business plan for that? That is not the end of it either because on top of that you need to factor in professional indemnity increases.
It is unsustainable and needs a rethink. Frankly, the Financial Conduct Authority should be embarrassed too.
If regulators and HM Treasury cannot see the endgame here, I will spell it out for them.
As the costs keep rising, then increasing numbers of financial advice companies will go out of business and the market will become more polarised.
Access to independent financial advice will become more restricted (and I use that word deliberately), and it will become more expensive with less choice.
That will make it less accessible and that is damaging to the consumer.
The principle that similar companies pay for the collapse of other businesses in their sector is fine in essence, but too simplistic.
When an advice company – a good one or a bad one – does business, it is not operating in isolation. There are insurers, investment companies and all kinds of other legal and regulatory companies that it either passes business to or uses to enable it to run.
So when a dodgy company fails, these other organisations are, in my view, responsible too.
We all know who the villains are, but while the money keeps flowing no one bats an eyelid.
What do insurers and investment companies do about the assets they have benefited from when the customer has been mis-advised? Nothing. They sit there picking up the annual charge.
The scale of the FSCS levy is a sign of a huge regulatory failure that has allowed companies to phoenix at will, and for company directors to keep restarting businesses.