The trade body for financial advisers has warned the industry is still being "tarnished" by the practice of phoenixing and lifeboating as it doubled down on its rally cry for regulatory fee reform.
In its latest policy paper published this week the Personal Investment Management & Financial Advice association argued for a "wholesale review of the fundamental drivers of calls" on the Financial Services Compensation Scheme.
The issue of the compensation scheme's rising levy has been one of much debate this year, with Pimfa frequently adding its voice to calls for reform in a bid to lower the cost of regulatory fees in the advice industry.
The trade body's latest rally cry, which warned of market distortion and a failure to protect consumers from unregulated products pushing up the cost of compensation, comes a week after the FSCS announced a £92m extra bill.
Advisers are set to pay an £8m share of the supplementary levy, with the sector having already reached the maximum level the FSCS can charge the class in a year.
Liz Field, chief executive of Pimfa, said the trade body and its members were "fully committed" to ensuring consumers were protected via the industry-funded lifeboat body.
She added: "However, the current environment allows some firms that simply should not be in business, to transfer their responsibilities to compensate their clients onto the rest of the industry through the practice of phoenixing. Lifeboating is also a key challenge.
"Aside from the direct harm this causes consumers, this tarnishes the financial advice and wealth management sector as a whole and creates an additional financial burden on well-run prudent firms.
"Firms need to continue to invest in their innovation and this is impacted by the exponential rise in FSCS fees."
Ms Field said Pimfa was aware it was a "complex issue" with "no single cure", but called on the government to find ways of legally limiting firms' ability to transfer risk onto the FSCS.
The latest supplementary levy announced by the FSCS last week was branded "disappointing" and a "bitter pill to swallow" by frustrated advisers who pointed the finger at the City watchdog and regulatory failures.
An FCA spokesperson told FTAdviser at the time that whilst the levy was necessary to protect consumers, the watchdog also recognised the redress bill was too high and it was "taking steps to reduce it".
rachel.mortimer@ft.com
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