'Who are these third parties?': Advisers question FCA’s audit proposals

Marriot concluded: “It’s certainly a step in the right direction, but if it's not done correctly, it could end up being a car crash.”

Tim Morris, an IFA at Russell & Co Financial Advisers, said: “Using a third party compliance firm to carry out advice checks makes sense yet adds to costs and will further squeeze the ability to deal with clients at the lower end of the scale.”

He added: “This will further increase the advice gap.”

Alongside the FCA’s focus on making PII cheaper and more accessible to drive down the FSCS levy, it also suggested an increase in capital requirements for advice firms.

Its thinking is that higher capital requirements could be used to prompt firms entering the market “to think carefully” about giving advice in high-risk areas.

Morris said: “Increasing preventative measures such as capital adequacy requirements sounds sensible. The only issue is these potentially draconian methods have the potential to be overly onerous and force more small businesses from operating in many areas of advice.”

Why the delay?

With any measures tackling the rises in FSCS levies and PII costs not set to be addressed until 2025 at the earliest, some advisers are questioning why the FCA isn’t committing to more immediate targets. 

“What [the FCA] are going to do in 2025 does not address the issue now,” said Andrew Oliver, an IFA with his own firm.

Oliver has previously written a letter to his MP on the funding of the FSCS levy, arguing “it was not sustainable in its current form”.

In response, he said a minister told him “how fortunate” he was to have a scheme for his clients and the reassurance that it is provided. 

“They didn’t even address the funding issue. Until recently, the FCA said the same. It seems that it’s only when it gets so bad that they actually start to look at it and right now it appears that’s all they are doing.”

Oliver cited the recent discovery by FTAdviser that the FSCS has identified some 400 phoenix firms - that is, advisers which are now pursuing claims against their old firms as claim management companies.

“It’s firms like mine that are getting hit financially whilst these other firms just fold and re-start,” said Oliver.