The Financial Conduct Authority's pledge to stop claims management company phoenixing within two years is a 'nice idea, but won't happen', advisers have claimed.
As reported by FTAdviser yesterday, the City regulator published a policy statement in which it set out rules that it hopes will see an end to phoenixing by regulated CMCs. It first consulted on these proposals in 2021.
The FCA said that in two years' time, the number of CMCs phoenixing would be zero, but some advisers who have spent several years working to gain compensation for clients affected by firms and company directors that have phoenixed said they remained to be convinced.
Neil Liversidge, principal of West Riding Personal Financial Solutions, gained CMC permissions a few years ago to help clients make claims for compensation without charging them the sort of disproportionate fees often associated with CMCs.
He said he was currently working with some clients who have lost out as a result of phoenixing and was disappointed that the FCA has set a two-year deadline.
Liversidge told FTAdviser: "The timescale is unacceptable and exemplifies the FCA’s failure to prioritise phoenixing, which genuine firms pay for.
"For more than two years I have been working pro-bono for a client whose pension was transferred into unregulated investments by way of ‘advice’. He’s lost the lot, and as a result he risks losing his home.
"The firm has apparently phoenixed already, a fact I have drawn to the FCA’s attention, and about which it appears to be doing nothing. If they can’t act on such abuse by rogue adviser firms, I have no faith in them doing anything meaningful about CMCs.”
Monitoring is 'meaningless'
Al Rush, principal of Echelon Wealthcare and the so-called Port Talbot Pensions Paramedic, said: "It is not going to happen - it is a nice gesture but it won't happen.
"It is not rocket science to get rid of phoenixing, but since the FCA took over the regulation of CMCs there have still been massive problems, not least the issue of the high fees they charge.
"I would want to see a change in legislation that would give a separate, distinct set of restrictions on directors of financial services company directors. If your advice company goes 'pop', it should be impossible for these directors to phoenix."
He would also like to see someone brought in to investigate the firm before it goes 'pop' to see if it has loads of complaints, and to make an independent report on the affairs of the company.
Rush added: "To say one is 'monitoring' the situation is meaningless - we need to know what the outcome will be if the CMCs do not meet their conditions. Otherwise the situation will continue."