1,421 advisers call for a fairer FSCS

26 Apr

Our day of action calling for a fairer Financial Services Compensation Scheme (FSCS) received overwhelming support from the IFA community, with 1,421 advisers signing the petition and sending an email to Mark Hoban MP, Financial Secretary to the Treasury.

The petition and emails called for two things:

1 – Better categorisation of firms within the FSCS funding system. Fund managers should pay for the failure of fund managers. Stockbrokers should pay for failed stockbrokers.

2 – Greater awareness of the funding of the compensation scheme; IFAs and our clients pay for the FSCS, the public should know about this.

A big thank you to all those who signed the petition, posted messages on Twitter using the #HelpUsHoban hastag and emailed me with messages of support.

I would also like to say thank you to IFA Life and Nucleus who sent a link to the petition to their members.

Thank you to Money Marketing, New Model Adviser and IFAOnline who ran (and updated) stories during the day which helped to raise awareness of the campaign.

Today I will be writing to Mark Hoban with a copy of the petition and all 1,421 signatures. I will also write to Hector Sants at the FSA and Mark Neale at the FSCS, to ensure they are aware of the strength of feeling over this issue.

As soon as we receive responses, I will post them here.

Help Us Hoban

25 Apr

Today sees the launch of our campaign for a fairer Financial Services Compensation Scheme (FSCS). It coincides with the payment of £60m of invoices to the FSCS by the IFA community and other investment intermediaries, to pay compensation to investors in failed schemes such as MF Global, Keydata and Arch cru.

The way in which the FSCS is currently funded is unfair and unreasonable. It has resulted in Independent Financial Advisers and their clients paying significant sums of money to compensate investors in failed schemes from companies that have no resemblance to IFAs.

My own small business has paid an invoice of £10,000 today to the FSCS. Like the vast majority of advisers, we never once recommended an investment in Keydata, Arch cru or MF Global.

We want to see the Financial Services Authority (FSA) overhaul the funding structure of the FSCS. In particularly, we would like to see better categorisation of firms in each sub-class, so the right businesses pay for compensation.

Today we are asking for help from Financial Secretary to the Treasury Mark Hoban MP.

Whether you are an IFA or a supporter, please take a minute to visit www.fscslevyactiongroup.co.uk/action and sign the online petition. This will send an email to Mark Hoban at his parliamentary email address asking for his help.

We aim to get at least 500 emails sent to Mark Hoban today and hopefully over 1,000. Whilst he might not be able to directly influence the funding of the FSCS, this day of action will demonstrate how important this issue has become in the IFA community.

We would also like to get this campaign trending on Twitter, to raise greater awareness of the main issues. Please take a moment to tweet about the campaign and use the hashtag #HelpUsHoban.

Remember that this campaign is time sensitive; the petition will close at midnight tonight on Wednesday 25th April 2012.

It’s really important that the funding of the FSCS gets resolved quickly, so these unfair and unreasonable levies on IFA businesses are brought to an end. No small business should have to pay for the failure of other unconnected businesses.

Because ultimately it is our clients who pay for FSCS compensation through advice and product charges, we need a fairer FSCS for the sake of our clients.

Please sign the petition today to send an email to Mark Hoban. Thank you for your support.

One week to go

18 Apr

One week today, on Wednesday 25th April 2012, we are coordinating a day of action to highlight the need for a fairer Financial Services Compensation Scheme (FSCS), by asking for help from Financial Secretary to the Treasury Mark Hoban MP.

We are asking every IFA to sign an online petition which will email Hoban asking for his support. The fairer FSCS wishlist expresses concern about the current funding structure and asks for more rational categorisation of firms when the FSA consultation paper is published later this year.

IFAs can support the day of action by visiting www.fscslevyactiongroup.co.uk on Wednesday 25th April 2012 and signing the online petition to email Mark Hoban with the following requests for the FSCS:

I am deeply concerned about the funding model of the Financial Services Compensation Scheme (FSCS) and the impact of levies on the IFA sector.

Whilst I support the purpose of the FSCS and its importance for providing confidence to savers and investors, the way in which it is funded is in urgent need of overhaul to introduce fairness to the system.

I am writing today to urge you to use your influence with the Financial Services Authority to achieve two things:

1 – I request that the FSA includes a more rational categorisation of firms in their consultation paper on FSCS funding models when it is published later this year. The latest £60m FSCS levy which is being paid by intermediaries today was mainly in respect of losses incurred by fund managers and stockbrokers (MF Global, Keydata, CF Arch cru and Wills and Co), not financial advisers. It is unfair that IFAs and their clients should pay for the failure of these business types.

2 – I would like to see the amount of compensation paid by IFAs to fund compensation for investors better publicised. As a significant item of IFA business expenditure over the past couple of years, I would appreciate greater awareness that this is an entirely industry funded compensation scheme, with investors paying the ultimate cost via product and advice charges.

Thank you for taking the time to read the contents of this message. I look forward to receiving acknowledgment of its receipt and details of your planned response in due course.

Twitter users can also support the campaign by using the hashtag #HelpUsHoban.

Day of action

13 Apr

Please add Wednesday 25th April 2012 to your calendar for the Day of Action we have planned to raise the issue of fairer FSCS funding.

We have picked 25th April as this is the day when most FSCS interim levies are being paid. On that day, the IFA community and other investment intermediaries are paying a whopping £60m to the FSCS to bail out investors in failed fund managers and stockbrokers.

The campaign this year is based on the theme of Help Us Hoban.

We encourage every IFA to use this site to send an email to Financial Secretary to the Treasury Mark Hoban MP on Wednesday 25th April, to request two things:

1 – Better categorisation of firms within the FSCS funding system. Fund managers should pay for the failure of fund managers. Stockbrokers should pay for failed stockbrokers.

2 – Greater awareness of the funding of the compensation scheme; IFAs and our clients pay for the FSCS, the public should know about this.

To make this as easy as possible, we have set up a system on this website which will automatically email Mark Hoban with this list of requests. All you will need to do on the day is visit this website, enter your name, email address and postcode, and press send.

You will also have the option to post a message on Twitter with a link to the email petition page and the hashtag #HelpUsHoban.

The aim on Wednesday 25th April 2012 is to send at least 1,000 emails to Mark Hoban and get #HelpUsHoban trending.

Please take part in this day of action and help by spreading the word to every IFA you know.

Interim levy 2012

28 Mar

We received our FSCS interim levy invoice yesterday. Here is the letter I sent to our staff yesterday morning which outlines the position this year:

Dear all

Our FSCS Interim Levy arrived this morning. The price we are paying this year for the failure of others is £10,139, so broadly the same as the bill we received this time last year.

Whilst the interim levy this year at £60m is ‘only’ 60% of the interim levy raised last year, our tariff income for investment activity grew by 56.2% between 2009 and 2010, which are the years on which this levy is based.

This interim levy relates to the costs of claims for MF Global, Keydata, CF Arch cru and Wills and Co, among others. MF Global claims alone are expected to account for almost £27m this year.

In addition to this interim levy, we will have a share of a further £22m to pay in the summer when the main annual levy is invoiced. There is also scope for a further interim levy this year of up to £18m before it tips over into the fund management sub-class for them to pay a share.

At £10k, this invoice represents around 1% of our expected turnover and around 10% of our expected profit this year. It’s a bit like being told to work incredibly hard for 40 days and then to hand over the results of all that hard work – absolutely soul destroying.

On a positive note, we are at least a profitable business with no debts and sufficient capital reserves that such an event does not create an immediate financial problem. I suspect there are lots of IFA firms in a very bad position this week as a result of their invoice. 30 days to pay and the bill is automatically deducted from our bank account.

It goes without saying that we all need to contribute to this exceptional item by working harder, keeping costs down and charging the proper amount for the work we do.

The FSCS is an important piece of the jigsaw when it comes to providing consumer confidence. The way it is structured and funded is flawed, so we will continue pushing for a reform of the system. Our preferred outcome is a pre-funded FSCS with an explicit product levy based on the risk profile of the product/fund being sold.

FSA response to the FSCS Levy Petition

22 Feb

FSA chief executive Hector Sants has responded to our open letter and petition with this two-page letter:

Download Hector Sants letter (PDF)

I appreciate Hector Sants taking the time to respond to our petition and demonstrate that the FSA understands the very real concerns of IFA business owners.

Perhaps the best we can hope for now is more effective regulator in the shape of the Financial Conduct Authority (FCA), taking earlier and more robust action where they identify emerging risks.

I remain optimistic that we will eventually see reform when it comes to the funding of the Financial Services Compensation Scheme (FSCS).

As soon as I get a response from Mark Neale at the FSCS I will also publish it here (with his permission).

Thank you to everyone who has supported this campaign.

FSCS Levy Petition

17 Feb

The FSCS Levy Petition closed today with 678 confirmed signatures. It has been posted to Hector Sants at the FSA and Mark Hoban MP, Financial Secretary to the Treasury.

The petition asked the FSA and the Treasury to urgently review the funding of the Financial Services Compensation Scheme (FSCS).

Thank you for your support. As soon as we have any response to this petition we will post the details here.

There is no logic behind this list

3 Feb

Citywire has today published a full list of every firm included in the FSCS investment intermediary sub-class.

You can download the list here.

A quick read through the 91 pages shows SIPP providers, fund managers and private equity firms.  Even Citywire – a publishing group – is included in our sub-class!

There is no logic behind inclusion in this list.  By categorising firms that are clearly not intermediaries in the same sub-class as intermediaries, all IFA firms carry the risk that one of these companies will fail and dump their liabilities on the rest of us.

We already knew that the categorisation as Keydata Investment Services as an intermediary was worrying, at best.  Sight of this list should confirm the worst fears of every IFA business owner for their future exposure to compensation payments for the activities of others.

Three important FSCS Levy headlines today

2 Feb

Money Marketing – Mutuals and MPs join call for FSCS shake-up

Citywire – FSCS announces £40m annual levy for investment intermediaries

IFAonline – FSCS annual levy could halve to £240m for 2011/12

Huge loophole in the FSA Regulation & Complaints procedure

2 Feb

This is a guest post by Paul Nedas, CEO of FinancialAdviceLiability

A major cause of the furore resulting from the FSCS Interim Levy has not even been discussed.

As a claims management company we have discovered a huge loophole in the FSA Regulation & Complaints procedure which allows IFAs & their PI insurers to escape financial liability for bad advice which results in clients obtaining compensation from the FSCS.

At the moment it is the responsibility of the IFA to notify their PI insurers of potential claims, however if they fail to notify the insurers, they can rightfully disclaim cover for any non-notified claims.

And if subsequently things get a little heavy for the IFA, he may decide, based on professional advice, to seek protection via liquidation/administration.

Resulting in claims submitted to the FSCS which would be funded by the FSCS levy. The good guys funding the bad and incompetent.

At the moment, it appears that the FSA are too easily satisfied regarding the status of an IFA’s PI insurance and the notification of claims procedure.

A possible solution: an independent online register to enable clients to submit details of claims. Details of such claims would be passed to the FSA who would demand confirmation from an IFA’s PI insurer within 21 days that they have been notified of the potential claim and that it would be potentially covered under the existing insurance policy.

You can call Paul on 020 7193 0831 or email him at paul@wealthmanagementforce.com. Financial Advice Liability is a trading name of Gray Selley Consulting Limited. Regulated by the Ministry of Justice in the conduct of claims management activities.