Aj Somal joins a growing list of disgruntled advisers who have blasted the recent fee hikes by both the Financial Conduct Authority and Financial Services Compensation Scheme, as he says the spiralling costs punish well-run businesses for the mistakes of badly-run practices.
The IFA at Birmingham-based Aurora Financial Planning argues that it will be impossible to “bring in new blood” to the profession if there is a fall in the number of companies offering advice.
The FSCS funding means that well-run, compliant firms have to pay for the bad practices of poorly run firms Aj Somal
Mr Somal says: “There has been a sharp rise in professional indemnity premiums over the past few years, and it would be a real shame if that meant well-run, small financial advice companies going out of business, as it would mean even fewer clients being able to access high-quality financial advice by qualified financial professionals.
“There is a need to bring in new blood into the profession, and if there is a fall in the number of firms that offer advice, then this drive to bring in new blood will be undermined.
“The FSCS funding means that well-run, compliant firms have to pay for the bad practices of poorly run firms, this is an age-old argument, and has been debated ever since I entered the profession over 20 years ago.
“There is no easy answer to the funding of the FSCS, but a review of the current funding structure is required, with perhaps well-run firms who have a very low historic complaint level paying less than those firms that have had a history of complaints in the past.”
The need for urgent change is echoed by Ricky Chan, who stresses that the industry is “approaching tipping point” as the current model is “broken and unsustainable”.
The director and chartered financial planner at London-based IFS Wealth & Pensions says: “I think we’re approaching tipping point, but the worst is yet to come – there will be increased claims during the recession when markets fall and issues emerge relating to defined benefit transfers. Both PI insurance and FSCS [costs] have been ever-increasing and adding pressure onto advisers.”