Providers have criticised the Financial Conduct Authority for forcing them to contribute towards advisers’ compensation costs.
The Association of British Insurers has issued a strongly-worded criticism of the policy, which would see providers pay 25 per cent of the compensation costs which fall to the intermediation classes.
Huw Evans, director general of the ABI, said: “The FCA’s proposal gets the balance wrong and seems to go against the fundamental principles of FSCS funding – that those responsible for the failures are the ones who pay.
“Expecting providers to foot the bill for intermediaries they have no control over is entirely misplaced and will continue to be widely opposed by providers.”
Because of those provider contributions, as well as other measures such as merging the life and pensions intermediation class with the investment intermediation class, the FCA has predicted that the cost of the FSCS levy will go down for advisers.
The FCA’s calculations of average levies between 2011 and 2016 showed the merged class with 25 per cent provider contributions would have paid a total levy of £94m, compared with £125m as unmerged classes.
In today’s (30 October) consultation paper the FCA has said it is fair for providers to contribute towards advisers’ compensation costs because they rely on advice firms for their business.
Steven Cameron, pension director at Aegon, said both providers and advisers benefit from the protection of the FSCS.
He said: “This benefits providers, fund managers and advisers alike which is why Aegon has always supported providers and fund managers paying a greater share of the levies intermediaries in their sector currently face.
“It’s important that the way the FSCS funding works reduces the size and volatility of levies well-run, responsible adviser firms face.
“The FCA’s proposal that product providers pay 25 per cent will no doubt split the provider community but should be examined on grounds of fairness and affordability across industry players including fund managers.”
One proposals which was welcomed was moving the pure protection intermediation class to the general insurance distribution class since many of the firms have paid increased FSCS levies because of an increase in unsuitable advice in relation to self-invested personal pensions.
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said: “To see revised proposals include the removal of protection from the pensions class is positive as this will greatly impact mortgage intermediaries’ bills.
“They have not only listened to our concerns but are openly engaging with industry to ensure that they implement the fairest solution.
“We are pleased that the FCA has recognised that providers are also responsible for the distribution of their products.”
damian.fantato@ft.com
