RegulationSep 2 2020

WPC urges advisers hit by levy hike to respond to inquiry

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WPC urges advisers hit by levy hike to respond to inquiry

A letter sent by Financial Adviser as part of our Keep Fees Fair campaign to Stephen Timms, chairman of the WPC, has outlined issues such as the sharp rise in professional indemnity premiums for advisers, largely resulting from defined benefit transfer work carried out after the 2015 pension reforms came into force.

Mr Timms has also been informed of the potential consumer detriment that might arise from a widening pensions advice gap, itself caused not just by a general hike in PI costs for all advisers, but also from the sharp rises in the Financial Services Compensation Scheme levy.

The MP was told of the levy hikes of up to 120 per cent faced by advisers, many of whom have told Financial Adviser they will either have to pass costs onto their clients or leave the industry.

Responding to the letter, Mr Timms has encouraged advisers to submit responses this week to its three-stage inquiry into the pension freedoms.

The deadline for responses to the first stage of the ‘Protection pension savers: Five years on from the pension freedoms’ inquiry is September 9. This phase will look at pension scams specifically.

He said: “The committee has recently launched an inquiry into the impact of pension freedoms.”

While he acknowledged: “The fees you refer to are primarily a matter for the Treasury Committee rather than us,” he added “anyone wishing to submit evidence to us is welcome to do so”.

After tackling pension scams in this first part of the inquiry, the WPC will move onto looking at accessing pension savings and saving for later life, with a call for evidence likely next year.

Advisers who believe the onerous burden of levy hikes and PI will create a situation where accessibility to pensions advice contracts, and thereby opens the door further to potential pension scams, are invited to submit evidence to the WPC, and the committee will investigate this prospect.

The advice industry has welcomed the suggestion as a way to incorporate the issue into the wider debate on pensions and the accessibility of advice.

Darren Cooke, chartered financial planner for Red Circle Financial Planning, commented: “This will be an interesting approach to take. We have seen before that the WPC does carry some clout when it comes to exactly these kind of issues.

“I think any approach we can use to raise the issue of failing regulation and the resulting increase in the costs we bear for compensation through the FSCS levy should be explored.”

Keith Richards, chief executive of the Personal Finance Society, agreed it was important to raise these matters with MPs.

He said: “Over the past few weeks there has hardly been a day when we have not been engaged in discussing the cost increases of both PII and regulatory levies, with members voicing their concerns about the immediate and longer-term impact on their clients and business if not addressed.

“The most common question members generally ask me is: ‘What can I do about it?’

“Writing to your MP as a small business within their constituency, and raising concerns about the impact that unsustainable costs and other barriers widening the advice gap are ultimately having on their constituents, is something which most MPs will be interested in and should offer support by raising with HM Treasury.”

The PFS recommends advisers, if submitting evidence to the WPC’s inquiry and when writing their letters, to give actual examples of the changing costs over the past few years, “and don’t forget to express the additional financial risk of increased PII restrictions, excesses and the over doubling of Financial Ombudsman Service limits from £150,000 to £350,000”, Mr Richards said.

He added: “The PFS has remained engaged with policymakers and the Financial Conduct Authority, but they assert any meaningful reform will require legislative change, and this is why the PFS is calling for the Financial Advice Market Review II.

“FTAdviser and the PFS are ready to work alongside more advisers in engaging with your MPs and putting this vital issue on their radar and push it further up the government’s agenda.”

Simoney.Kyriakou@ft.com

Join Financial Adviser's letter-writing campaign to urge HM Treasury and FCA to reconsider their stance on fees. Send your comments and support to us at fa.letters@ft.com.