A top boss at the Financial Conduct Authority has warned on the ‘unsustainable’ rising cost of the Financial Services Compensation Scheme levy.
Debbie Gupta addressed concerns that the total industry levy is expected to rocket to £1bn for 2021/21 – marking a 48 per cent rise on the previous year.
Advice firms are expected to contribute £240m, the same as last year, due to the fact the class is forecast to breach its funding limits for the second year in a row.
The director of life insurance and financial advice supervision at the FCA, said: “This is unsustainable and we want it to come down. We understand it is hurting you.”
She made the comments during the Pimfa Virtual Fest V2 today (March 10), where she addressed accusations that the regulator had failed to act fast enough to shut down misbehaving firms.
She said: “I am not one to shy away from criticism and I am not about to say there is nothing more we can do. But saying there is room for improvement is not the same as saying it is the cause.
"Stemming the flow of poor advice is key. But there are tensions between what is desirable to what’s achievable.
"What is practical and what’s fair. These are not simple questions to answer. We as a regulator must change our approach.”
These included firms involved in ‘riskier’ advice should hold more capital to avoid defaults in the first place, the same firms should take out ‘more’ or ‘different’ professional indemnity insurance; or those riskier firms simply pay more towards the FSCS.
Last year Gupta told steelworkers at a meeting that the regulator was looking into PI insurance exclusions as a way to tackle these issues.
She said the regulator was doing further work on how exclusions were arising with the aim of reducing case numbers landing at the FSCS.
Gupta has previously warned advisers they must ensure all of their business is covered by their insurance.
Today, she also used her keynote speech to suggest ways the FCA is looking at improving the consumer investment market and alluded to three areas for change, improving the mass market, fighting scams and looking at issues around redress.
She said she was particularly concerned that recent research had found that the majority of people with more than £10,000 in savings kept their money in cash and they were therefore not getting the most out of it.
She added: “We want more people to invest their cash safely because they are missing out. They find investments intimidating and need our help.”
She suggested consumers could be made aware of more ‘plain vanilla’ stocks and shares Isas, have better access to simplified advice and suggested adding a traffic light system to investments to make consumers more aware of high-risk propositions.