This week we received our annual FCA fee invoice and I am compelled to write and share my outrage at the level of increase. In total we have been invoiced £53,000 of which £37,000 is in respect of the Financial Services Compensation Scheme Levy (FSCS) for life and pensions. This compares with £8,500 last year, representing a 320% increase in rating. In total, we now pay £47,500 to the FSCS to clear up other people’s mess. This is more than we pay for our own Professional Indemnity cover.

We have had no claims on our PI policy for many years yet premiums continue to rise. This clearly reflects underwriters view of the severity of regulation and the sheer impracticality of complying with rules that in many instances have no defined parameters.

The proposed increase in capital adequacy will require us to retain large amounts of cash on the balance sheet which would be better utilised improving systems and services to clients. This huge increase in the FSCS levy creates additional pressures and further diminishes our ability to deliver an improved client experience.

We are fortunate in being able to accommodate this increase. Many smaller firms will struggle and we will see an acceleration in those looking to get out of a profession in which it is increasingly difficult to make a living. The publics’ ability to source financial advice will be further diminished and advisors will continue to seek out the wealthiest investors, disenfranchising the mass market. Financial advice will be increasingly concentrated in the bigger firms that historically have provided inferior service and been the main source of demand on the FSCS.

The time has come for a complete overhaul of the FCA and FSCS. Smaller independents need a lighter touch supervisory regime, a more proportionate approach. The size of the FSCS levy does nothing to increase consumer confidence; more a testament to the failure of FCA in its primary duty, effective regulation. Huge complicated rule books and a guilty until proven innocent attitude have made advisors an easy target. Rather than increasing capital adequacy requirements why not increase the minimum levels of firms PI and audit appropriately? More detailed PI reporting would ensure cover for a firm’s activities were more appropriate and reduce the instances of PI failure. It is hardly surprising therefore that the FSCS is called upon to such an extent. The principle of the FSCS levy is fundamentally flawed and inherently unfair. Scandals like Arch Cru were of product providers making yet have been laid at the door of advisors. I know of no other sector, regulatory, public and most certainly not private where such cost increases would be tolerated. Indeed, we would fall foul of the Treating Customers Fairly principle.  It is an indictment of the failure of the regulators and their apparent unfettered powers that such an increase can be imposed.

Finally, the board structures are seriously flawed. Only two executive directors and eight non-execs gives minimal accountability. The fact that there is no FD demonstrates a disdain for advisors finances and leads to waste such as the recent £3.2m on unused software.  

It is time for the financial advisory sector to voice its concerns before it is too late. I have started an on line petition which I implore all advisory firms, advisors and staff to support. We have relied for too long on others to represent us and it has been a dismal failure. We need to collectively educate the FCA before they drive us out and deprive our clients of the first class service they currently receive.

Paul Beasley ACII

Managing Director

Richmond House Group

 www.rhg.co.uk