Mr Smith said: “To see the FSCS advertising across Twitter and other social media encouraging claims and announcing that it’s free suggests to me that they have misunderstood their purpose and mandate.
“Surely it will be better to prevent the problems arising in the first place rather than attempt to catch them up with compensation claims after the event. Prevention is better than cure.”
Rebecca Aldridge, managing director at Balance Wealth Planning, said: “The FCSC should not be trying to compete with CMCs but rather should try to shut them down.
“While it may be necessary for CMCs to operate as they offer individuals a service there should be rules in place to prevent them from touting for business or advertising their services.”
Ms Aldridge said: “The FSCS levy is increasing again, with advisers footing the bill. This is unfair as advisers contribute little to claims as they are not the cause of the majority of the problems."
A spokesperson for the FSCS told FTAdviser: "We recognise the industry’s concerns about the rising trends in compensation costs, and we are deeply conscious that without levy payers' funding and support FSCS cannot expect to carry out its remit.
"However, FSCS has a duty to raise awareness of its existence and let consumers know that they can turn to FSCS if they lose money through their dealings with a failed financial services firm. And also, that consumers can do so direct without the need to engage a claims management company.
"One of the ways we do this is through our social media channels. We also work with firms and insolvency practitioners. It is key for us to continue to work with the industry to help to reduce compensation costs whilst avoiding consumer detriment and maintaining confidence in the financial services sector."
amy.austin@ft.com
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