Financial Conduct Authority  

FCA PI delay to cause 'severe hardship' for IFAs

FCA PI delay to cause 'severe hardship' for IFAs

Advisers have warned the regulator's timetable for a solution to the industry's professional indemnity insurance and FSCS levy dilemma will "cause severe hardship" to the sector. 

The Financial Conduct Authority has also been accused of "dragging its feet" over the increasingly hardened insurance market for advisers and growing regulatory bills, following estimations made by its boss that the problem would take "two or three years" to solve. 

Alan Smith, chief executive of financial planning firm Capital, said: "Regrettably this is reflective of public-sector mentality. Financial advisers and their staff, all across the UK are facing a fundamental challenge to their very livelihoods as well as their ability to support and advise their clients during what is obviously a very difficult period."

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Mr Smith warned many firms were being "squeezed by the perfect storm" of substantial increases in regulatory fees, professional indemnity premiums and the challenges of operating and developing business during the pandemic.

He added: "To say that we are years away from any sort of solution is extremely disappointing and will cause severe hardship to many hard-working financial professionals doing their best to care for their staff and their clients."

It comes as the newly appointed chief executive of the FCA told MPs last week it would take "two or three years" to abate the industry levy and fix the current professional indemnity market, which he admitted wasn't "functioning particularly well" for advisers. 

Speaking at his second Treasury Select Committee, Nikhil Rathi said the regulator was aware of the "burden" increasing regulatory costs were putting on the advice community, however "for the majority of advisers it's a small portion of their overall regulated income".

But he added he understood the "strain that puts on specific firms".

Ricky Chan, director at IFS Wealth & Pensions, said whilst he was pleased the FCA had acknowledged the current system for both the PI market and the Financial Services Compensation Scheme levy were not working well, he was "very disappointed" at the lack of urgency to resolve the issue. 

Mr Chan said: "For business owners and advisers in financial services, our livelihoods are affected and could be threatened by an unsustainable FSCS levy and rising PI premiums alongside the withdrawal of cover and terms for some. 

"Simply saying that for most businesses it’s a small part of their revenue, just goes to underline the lack of urgency or care.

"This is just the FCA’s way of kicking the can down the road and hoping that everyone forgets about it or that the levy would naturally and gradually dampen down in future when the higher claims for unregulated Sipp investments and mini-bonds have been mostly paid out. But this is just procrastination."

Mr Chan said he wanted to see immediate action from the regulator and a consideration of the recommendations proposed by professional body the Personal Finance Society. 

He added: "[This should be the case] rather than doing endless consultations with no definitive course of action to show for it."