Nearly two-thirds (64%) of financial advice business owners and wealth management chief executives do not trust the Financial Services Compensation Scheme (FSCS) to deliver fair outcomes for consumers or their firms, according to a survey of Personal Investment Management & Financial Advice Association (PIMFA) members.
The survey of 84 business owners and chief executives of member firms of PIMFA, the trade association for the wealth management and financial advice industry, also reported that levels of trust in the FSCS have remained unchanged, or have not improved in the past five years for 60% of firms.
Results from the survey revealed the extent to which the FSCS is putting firms under increased financial pressure, with 45% of member firm chief executives or business owners reporting seeing increases in their FSCS levy bill of more than 100% in the last five years. More than four-fifths (82%) of members said that FSCS costs now accounted for at least 20% of all outgoings, excluding payroll and accommodation costs.
Liz Field, chief executive of PIMFA, commented: “The FSCS plays an absolutely vital role in protecting consumer savings and we recognise that the trust it engenders for consumers has a benefit to our firms.
“But the results presented in this survey point to a wider disconnect between a profession, which seeks to deliver the best possible outcome for consumers, and a regulatory system that most firms see as providing inadequate support at best, or failing both consumers and firms alike at worst.
“Every single person that has had to use the FSCS has suffered a bad outcome that it would have been much better to avoid. Government, regulators and industry must work together to ensure that, ultimately, policy is designed in such a way that in the future consumers only have to rely on the compensation scheme in extreme and unpredictable circumstances.
“Poor firm behaviour and harmful products must be identified quickly, enforcement action taken swiftly, and all parties commit to ensuring that claims upon the FSCS begin to fall rather than continue to rise.”
Julie Hunt, managing director of independent financial adviser firm, Face-to-Face Finance speaks of her frustration with the FSCS levy fee increases: “It makes me personally feel very frustrated, our rise was 48%, which if our business had grown proportionally that wouldn’t be a problem, but we had a 4% increase last year. The FCA is constantly asking us to make our fees cheaper, however how can we do this with increases in fees from them of 48% and PI fee increases of 20%? We are being pulled from both directions.”