TMA mortgage club has urged brokers to lodge their disagreement with proposals to change the way the Financial Services Compensation Scheme (FSCS) is funded that could see mortgage advisers pay more.
The Financial Conduct Authority's paper, published in December, outlines three ways for reducing the volatility of the levies advisers pay – all of which involve reforming the funding classes.
As it stands, the FSCS levy puts life and pensions in the same class, meaning brokers who only advise on mortgage protection are paying to insure pensions products, including self-invested personal pensions which have been the source of recent levy increases.
But none of the three proposals put forward by the FCA address this situation.
David Copland, director of TMA, said: “Asking mortgage and protection brokers to pay for poor guidance on pensions is wrong.
“Most of our advisers are not licensed to sell pensions, but are currently paying for bad advice on pension products. Simply put, protection advisers should not be paying into a dual life and pensions pot.
“Whilst the FCA has recognised there is a problem, they have not recognised that these pots must be separated.
“This has to change, and brokers must take action. That’s why we are campaigning for brokers across the country to encourage the regulator to think again.”
The options proposed by the FCA include merging the four current intermediation classes, merging investment intermediation with life and pensions intermediation and keeping the current structure.
The FCA said it had received representations to split the classes further, as TMA has suggested, but said this would likely increase volatility rather than reduce it.
The high cost of Sipp claims has been pushing up the size of the life and pensions levy for the FSCS in recent years.
Last month the FSCS said advisers would have to pay £270m as claims continued to rise across the industry.
The indicative levy for 2017/18 for life and pensions advisers alone will be £171m - a £45m increase on the current year.
Claims from the life and pensions class are expected to be so high that they will exceed the class's annual threshold, meaning the FSCS will have to call on spare funds from the retail pool which all levypayers contribute to.
The increase in life and pension claims is due to the number of cases relating to self-invested personal pensions, and advice given to invest funds in high-risk, non-standard assets through the pension wrapper.
Mr Copland said the FCA should ultimately replace compensation fees with a product levy, weighted against the riskiness of the product being sold.