Around 80 per cent of compensation claims against financial advisers are for unregulated investment sales, according to Financial Services Compensation Scheme chief executive Mark Neale.
Neale said the vast majority of the £125m paid out by the FSCS this year concerned unregulated investments in areas like forestry and storage pods.
The FSCS chief made the statement today at an event held by Mortgage Strategy‘s sister title Money Marketing.
Currently advised clients can claim on the FSCS, even for unregulated products, because they have taken regulated advice, and advisers do not need any additional permissions to recomend unregulated products.
Neale says: “Our research shows that the protection we provide is encouraging people to go and seek advice. There is still a lot of distrust – around pensions particularly – and the FSCS scheme is reassuring, but clearly costs do have to be pooled across the industry.
“The FCA has recommended making a broader, deeper pool. It’s not for us to say how that should be done, but we think fees according to risk is appropriate – firms that do recommend unregulated products should pay a higher levy.”