February 17 – Cheesecake all round

The industry is about to descend into unseemly squabbles over the FCA proposals to reform the Financial Services Compensation Scheme.  The pre-consultation discussions were characterised by goodwill, open minds and positive debate of the issues.  Now we have tangible proposals on the table which firms and trade bodies can attach £s to, the debate suddenly changes.

Whilst all of the industry is agreed that the fundamental issue is the sheer size of the ever-growing cake that has to be paid for, it is how that is to be cut-up and apportioned that blights the next few months.  It is already clear that the product providers have little stomach for contributing to the costs of the advice community.  Lost on them the need to ensure that their carefully crafted products should only be sold through trusted and validated business partners to people who genuinely want or need the product.

Their view that they have never done anything wrong so why should they pay, is an interesting refrain as heard by mortgage and protection brokers.  These same brokers are currently picking up the bill for unregulated investments sold in SIPPs and remortgage business done to invest in Bulgarian property which never materialised, indeed was never really planned.

As I am on my third fundamental review of the FSCS it has moved from being the last line of the regulatory bill to being front and centre.  FSCS total costs are proposed as being over £300m to be passed back to intermediaries, as opposed to the FCA intermediation fees of circa £120m.  The penalty of failure to properly regulate our industry is now falling hard on the good firms that survive.

Providers and intermediaries need to come together and evolve a better battle plan to share the load, reduce the number of claims and ensure that fraudsters and the feckless are banished from our industry.  This must be a shared activity that is not lost on a battle of who feels the most hard done by.

Robert Sinclair
Chief Executive, AMI
January 2017