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9 in 10 brokers say FSCS is in need of reform

Nearly nine in 10 mortgage professionals believe the Financial Services Compensation Scheme needs reform.

A poll of 122 Mortgage Strategy readers shows 88 per cent believe it is time for a change to the way brokerages are levied.

The poll comes after broker anger that they are having to “pick up the bill for miscreants” in the life and pensions sector.

Presently, the FCA and the Financial Ombudsman Service categorise term assurance and critical illness as “non-investment protection policies”. However, the FSCS classifies them as life and pensions business. This means brokers are having to pay for things such as poor pensions advice, even though they do not offer advice in such areas.

Moreover, the FSCS levy trebled from £33m in 2014/15 to £100m in 2015/16, which the compensation scheme says is largely due to a rise in claims for missold Sipps and, therefore, the extra fees will fund the redress for these.

Last week, London & Country director Pat Bunton said his firm’s levy totalled more than £250,000 this year, of which 73 per cent related to life and pensions.

The FCA is set to consult on the FSCS’s funding model next year. Both Bunton and Association of Mortgage Intermediaries chief executive Robert Sinclair propose a “very small” product levy that would go towards funding the compensation scheme.

Your Mortgage Decisions director Dominik Lipnicki says: “With FCA fees and everything else, it all goes one way – only up. It seems unfair to me that you have to pay for a risk that you do not pose. You are effectively subsidising problems in another sector.”

London Money director Martin Stewart, who also offers a small number of clients life and pensions advice, says: “Ultimately, who is going to pay? The client is going to pay. 

“If my fees go up by £300 a month, I will put my broker fee up by £100. It is a self-defeating stick they keep hitting us with. The whole thing needs reform.” 

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  • George Grant 10th August 2015 at 4:16 pm

    I have just recently resigned from Fair Deal Mortgages (Sesame). I have just paid £633.00 FCA LEVY FEE in June. Sesame have now informed me that the FCA LEVY has to be paid in full even though the next payment is due in November. This cannot be fair as I have already left Sesame.

  • Chris Hulme 10th August 2015 at 4:09 pm

    I am in whole hearted agreement that the levy on the industry covering the problem rogues that left clients in the mire is in dire need of reform.

    It is incomprehensible that those who remain (and by that very nature have gritted determination and something tremendous about them to wade through and survive the turmoil of the last 8 years) should be picking up the tab year after year.

    The downside is where do the funds come from then if the only remaining market participants that can be compelled by regulators to contribute are the good guys?

    Fifteen years ago there were well over 250,000 advisers in the UK. By mid 2013 the FCA reports this was down to just over 32,000 Regulated Advisers. Even if we assume we had a long stop of 15 years, how is it feasible for 32,000 advisers to pick up the bill for the issues caused in markets so long ago and by so many?

    Reform is needed but so are a new sources of funds…. this is going to be far from easy.

  • thruthelthrolth 10th August 2015 at 2:58 pm

    The only wonder is – who on earth are the 12% that voted in favour of the status quo?

    Presumably they are happy to accept responsibilty for the misdemenours of others and to pay three times more for the priviledge – thank heaven that almost 90% voted for a change in the way the levy is calculated.

    Will the FCA take notice? We can only hope