View more on these topics

Networks divided on passing on bumper FSCS levy to members


A recent levy by the Financial Services Compensation Scheme is so large that network bosses may be forced to pass on the cost to their members, Mortgage Strategy has learned.

Networks have different fee models, but many aim to insulate members from unexpected regulatory bills.

However, the FSCS has recently hit mortgage brokers with levy bills that are unusually large for two reasons.

First, the ‘home finance intermediaries’ class has been hit by a £15m supplementary levy to pay for “unforeseen compensation costs” in the 2016/17 financial year.

Around £10.5m of this was due to FSCS claims against Fuel Investments Limited after the firm advised clients to remortgage their UK homes to free up money for high-risk property investments.

Second, mortgage brokers are partly picking up the bill for a massive wave of claims in the life and pension intermediation sector.

An FSCS statement on 16 January said it expected the rising trend in these complex claims to continue, with the levy predicted to raise £171m, exceeding the annual limit for that class and triggering the contribution from all levypayers.

Brokers and networks were sent FSCS bills for the extra cash in late January and early February, asking them to pay within 30 days.

Split opinions

Networks are divided on how to handle the issue.

LSL Property Services director of mortgage services David Copland says LSL networks Pink and First Complete are still deciding how to handle the levy.

He says: “We haven’t made our minds up on what we are going to do. But we constantly make our ARs aware of the costs of regulation.”

Copland says the LSL networks would normally not charge members extra for regulatory levies, as these are covered by membership fees, but the size of recent FSCS bills means one-off charges have been necessary.

He says: “The problem is it’s now happening on a regular basis and it doesn’t allow you to plan. They tell you someone’s messed up and then four weeks later you get the bill.”

First Complete and Pink sales operations director Toni Smith says: “We fundamentally disagree with the way the FSCS levy is charged.

“Our advisers are not licensed to sell pensions products but are expected to pay for poor advice on pensions.

“To that end, we would like the current FCA consultation to reconsider how the levy is calculated to separate the dual life and pensions pot. As a business, we are also considering how to absorb the latest levy and are in communication with advisers in our network about this issue.

“Over the longer period, there is no doubt that this constant increase in FSCS costs will need to be factored in to every network’s business model.”

Mortgage Strategy understands other networks are also talking about passing on the latest levy.

FSCS exposure

Some networks’ structures mean brokers always have to pay a share of FSCS levies.

TenetLime managing director Gemma Harle says the network does not include FSCS levies in its membership fees, so its brokers will have to pay some of the latest bill.

However, TenetLime will soften the blow for its members.

Harle says: “We discount the FSCS levy charge for our members and also offer the ability for them to spread the payment over a period of time.”

Sesame’s business model also means FSCS charges are passed on, although the network similarly lets brokers pay their levy share in instalments.

Personal Touch Financial Services also typically passes on FSCS levies.

A spokeswoman says: “As with most other networks, our regulatory costs are separate to network costs. As such although the additional levy, although highly unwelcome, will be treated as a disbursement.”

But some networks will not pass on the latest levy.

Mortgage Advice Bureau chief executive Peter Brodnicki says the network will swallow the latest bill.

He says: ““Historically we have taken the decision to absorb all FSCS fees and levies, and have done so again with the latest levy.”

A Stonebridge spokesman says: “It’s always factored all regulatory charges into the one existing network charge for firms and has no plans to change this.”

Openwork has been approached for comment.



FSCS reveals single firm behind most of emergency broker levy

Fuel Investments Limited is the firm responsible for 70 per cent of claims leading to an emergency £15m levy against mortgage brokers, according to the Financial Services Compensation Scheme. The FSCS confirmed the levy last month after a wave of claims against a then-unnamed firm caused the claims body to increase its forecast levy for […]


In My Opinion: Strategy versus tactics for FSCS

The FSCS can now deal with the peaks and troughs more efficiently, and provide a faster and more convenient service We have just published our Plan and Budget for 2017/18, which supports the consultation that the FCA and Prudential Regulation Authority are undertaking on our management budget. I often think this annual document well illustrates […]


FSCS warns over scammers pretending to be compensation scheme

The Financial Services Compensation Scheme is warning of an email scam where consumers are being promised a $5.7m (£4.5m) payment from the lifeboat fund. The email includes a fake form asking people to give personal information and a fake identity card claiming to be from an FSCS staff member. An FSCS statement says: “Neither is […]

Parental leave and pensions

Fiona Hanrahan  – Senior Product Insight and Technical Support Analyst We are often asked how parental leave impacts workplace pension schemes in terms of funding in general, auto enrolment and salary exchange. This article will explain each of these. How does parental leave impact the funding of workplace pension schemes? A member of a defined […]


News and expert analysis straight to your inbox

Sign up
  • Post a comment
  • Chris Hulme 14th February 2017 at 4:14 pm

    It is an understandable concern for all participants from Networks to AR’s to DA’s but really? an additional £15m to be covered by less than 10,000 advisers? Perhaps the time has come for the industry to stand its ground against this tide of fees and levy’s, after all any fee that is passed onto the network, the AR or the DA will ultimately be funded by the client.


Why register with Mortgage Strategy?

Mortgage Strategy continues to be the market-leading B2B mortgage publication in the UK, and provides trusted, independent insight with the aim of helping, promoting and analysing the latest developments for mortgage professionals.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Mortgage Strategy Events
Be the first to hear about our industry leading conferences, awards, webinars and more.

Research and insight
Take part in and see the results of Mortgage Strategy's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now