The Financial Conduct Authority said in its consumer investments strategy yesterday (September 15), firms that can demonstrate they have given good advice should be able to get PII at a fair price, despite the market shrinking from 15 to five providers in the past five years.
It said one way to do this could be via a third party audit, where an independent company would assess the quality of advice given and thereby instil confidence in the insurer.
The more liabilities are unmet, the more the Financial Services Compensation Scheme levies on advisers are driven up, the FCA warned.
As such the proposal could prove a major part in solving a regulatory deadlock that has trapped advisers for years.
But advisers are not so sure about how it would work.
Martin Bamford, head of client education at Informed Choice, told FTAdviser: “Peer review would only be an acceptable solution if it replaces the regulator. To suggest that professional advisers need a peer to mark their homework is offensive.”
Bamford added: “I’m not holding my breath that these proposals will solve anything. We supply so much data to the FCA, especially through their multiple Covid surveys, that they must know how intolerable the current and proposed levies are.”
Advisers fall under the Life Distribution & Investment Intermediation class which the FCA is hoping will see its levy stabilised following a series of measures proposed by the regulator.
It’s certainly a step in the right direction, but if it's not done correctly, it could end up being a car crash.Sam Marriott
Indeed, from 2025 to 2030 the FCA intends to target a 10 per cent year-on-year reduction for this and the Investment Provision funding class. But this will mean advisers will have to wait another four years before levies come down.
As for PII, FCA data shows costs for firms, which have previously advised on defined benefit pension transfers, have increased from around 1-1.5 per cent to 3-6 per cent of a firm’s income.
On this front, the FCA didn’t commit to a percentage reduction like it did on FSCS levies. Instead, it placed the emphasis on advisers and the quality of their advice.
Mixed feelings
Sam Marriott, director and co-founder at CSE Financial Services, told FTAdviser he had “mixed feelings” towards the FCA announcement yesterday with regards to the third party audit proposal.
