ABI slams FCA proposals that insurers should pay more for adviser failings
In a document entitled ‘Reviewing the funding of the Financial Services Compensation Scheme (FSCS): feedback from CP16/42, final rules, and new proposals for consultation’, the FCA outlined plans that could see many small;ll. to ,medium sized financial adviser firms save money on their regulatory costs, via changes to the way that the FSCS is funded.
Reduced adviser costs
The UK regulator is asking providers to pay 25% of the lifeboat fund’s compensation costs. It is also bidding to move pension and investment funding classes together, to help reduce adviser costs.
In the paper the regulator added merging life and pensions intermediation and investment intermediation funding classes ‘should smooth firms’ FSCS levy contribution to a degree, helping to reduce volatility’.
The FCA said that the consultation data suggests that merging the life and pensions intermediation and investment intermediation classes will “spread the cost of failure” across more firms, reducing the annual average levy for firms and reducing volatility for the class and “increasing sustainability”.
According to the FCA analysis published in the updated consultation paper, under the 25% contributions rule change a small life and pensions advice firm could have seen its FSCS bill fall from an average of £9,000 to £5,850 in 2016/17 and a small advice firm in the investment class would have seen it bill fall from £9,400 to £7,950.
A medium sized life and pensions firm would see its bill fall from £180,000 to £117,000, while a medium sized investment advice firm would have seen its bill fall from £188,000 to £159,000, the FCA said.
To read the full FCA consultation paper, click here.
Official responses to the consultation paper must be submitted by 30 January 2018, the FCA said.