Adviser lands at FSCS with claims worth thousands of pounds

REX Financial Services defaulted with the industry-funded lifeboat body in September after ceasing all regulated activity in July last year. 

The FSCS told Financial Adviser it had received four claims against the firm relating to self-invested personal pensions and other pension advice. 

One Sipp claim has already been paid, with a former client of REX Financial Services receiving £3,363 from the compensation scheme.

Pension advice claims can run into the tens of thousands, with the FSCS paying out £85,000 on just one pension transfer claim against a Glasgow-based adviser earlier this year. 

In accounts published online the REX Financial Services's balance sheet in November 2018 showed cash in the bank of just under £20,000. 

According to Companies House, the advice firm applied for a voluntary wind up in March of this year but the strike-off process was suspended in July following an objection.

Pension claims fuelling a growing levy 

The nature of the claims are part of a growing trend seen at the FSCS, which earlier this year attributed the rising cost of its levy to a growing number of pension mis-selling claims.

The increased levy to be shouldered by advisers this year also includes and an extra £44m set aside to meet claims against the collapsed London Capital & Finance.

Most recently the bill for intermediaries rose by £16m to £229m, sparking an industry-wide campaign for reform which has picked up pace in recent months and gained support from a number of MPs. 

Amid the uncertainty surrounding the coronavirus crisis the industry-funded levy looks set to continue its upward trajectory, with FCA chairman Charles Randell warning earlier this year the already "unacceptable" cost was likely to increase as a result of the coronavirus crisis. 

A recent 12-page report published by the Personal Investment Management and Financial Advice Association found 45 per cent of its member firms had seen increases of more than 100 per cent in their FSCS levy bill over the past five years. 

This publication has itself seen data showing one advice firm witnessing its regulatory bill, which also includes FCA fees and a contribution to the ombudsman, jumping by almost 165 per cent from £19,400 in 2018 to £51,400 this year.

The long-stop debate 

The resurgence of defined benefit transfer and complex Sipp claims returning to haunt the industry has prompted some to call for historic pension claims to be left in the past in a bid to dampen the rise of the FSCS levy. 

John Moret, also known as “Mr Sipp” due to his advocacy for the pension products, told FTAdviser last month the industry should fix its legacy issue by no longer dealing with claims from more than eight years ago.

Mr Moret said the sooner the industry could "effectively ring fence" these historic claims "the better it will be and would have benefits in terms of funding the FSCS going forward."

But others are not convinced a long-stop will ever be re-introduced to the advice industry. 

Derek Bradley, chief executive of trade body Panacea Adviser, said: "The long-stop was removed years ago - had its protection been restored, IFAs would have seen any claim against them become unenforceable after 15 years had elapsed.

"This protection was enshrined for all within the Limitations Act 1980 and was removed for financial advisers by the government under FSMA 2000 legislation statutory instruments. In other words legislation with parliamentary debate.

"The problem with compensation is that there is a societal expectation, that if a loss occurs as a result of a client's retrospective appraisal or review of financial advice somebody else will cover the loss.

"If the firm is still trading they will. If not the FSCS will. A fantastic no-loss scenario."

rachel.mortimer@ft.com 

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