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Factory-gating and FSCS bills: the week in news

Factory-gating and FSCS bills: the week in news

It probably counts as a bad week as a bank and can't do that most basic service people expect from you: accurately tell your client how much money they have. But that's what TSB has been up to this week.

For those of you who have had marginally better weeks, it's time for the week in news.

1) Providers on the wrong end of the bill

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Don't worry: no one is being arrested but product providers might feel it's a bit criminal that they are being asked to pay more towards the cost of failures in the financial sector as part of plans to cut advisers' bills for the Financial Services Compensation Scheme.

This was just one of a number of reforms published this week by the Financial Conduct Authority.

The FCA confirmed it would require product providers to contribute about 25 per cent of the compensation costs which fall on advisers.

It is also looking for ways to force advisers' PI insurers to cover some of the cost of compensation by allowing the FSCS to claim against a defaulted firm’s insurance.

Some PII firms had put in place exclusions, such as a general insolvency clause or an FSCS-specific exclusion, that meant the FSCS was unable to bring a claim on the policy but the FCA is proposing to ban this practice.

This prompted concerned that PII provision would dry up or become much more expensive.

2) Tout of order

Advisers hanging around outside workplaces run the risk of not only looking extremely creepy, but also of breaching the FCA's rules, it emerged this week.

It came as more cases of the practice come to light even after widespread condemnation of those who targeted British Steel workers in this way.

Jonathan Watts-Lay, director of Wealth at Work, which provides financial education, guidance and advice in the workplace, revealed it has had clients "where certain locations of their companies effectively have been factory-gated by localised IFAs".

The FCA doesn't have any specific guidance on factory gating but central to its regulation of the sector is the principle that it expects financial advice firms to "act honestly, fairly and professionally in accordance with the best interests of its client".

3) Go with the flow

Speaking of our friends at the regulator, financial advisers have been warned to make sure their cashflow plans are air-tight, as the FCA is expected to intensify its focus on this area.

Rory Percival, former technical specialist at the Financial Conduct Authority, who now runs his own consultancy, told FTAdviser that this will be an area of increased scrutiny in the coming months.

He said he has received anecdotal reports cashflow modelling tools are not necessarily all being used in the right way.

Cashflow planning tools are used by financial advisers to help determine the sustainability of a client's income versus their outgoings over the years of their life, and especially in retirement when it is expected income from employment will dramatically reduce, leaving clients reliant on a limited pot of savings and investments.