Advisers have been urged to make their voices heard about a perceived unfairness on how the Financial Service Compensation Scheme (FSCS) funding model works.
Last week, the Financial Conduct Authority (FCA) announced it will review the rules covering the scope and coverage of FSCS compensation payouts for specific regulated activities and its compensation policy so it is “appropriate, proportionate and takes into account changes in the market and its regulatory approach”.
And in responding to a question submitted by Health & Protection to CEO Nikhil Rathi about claims the FSCS’ funding model is causing protection and insurance intermediaries to bail out other ‘mismanaged’ firms, Rathi admitted the system is still affected by legacy issues.
He admitted pensions mis-selling and other problematic advice issues had caused the levy to rise significantly and that in these circumstances the burden to shoulder that levy needed to be shared more widely than simply one class of firm.
But Branko Bjelobaba, principal at consultancy Branko, told Health & Protection he did not think it was fair that private medical insurance (PMI) and protection advisers should carry the can for firms responsible for pensions mis-selling.
“Why attack sectors that were never ever going to get involved in advising clients on pensions? I just don’t agree with that, that the whole sector needs to pay,” he said.
“I fundamentally disagree with that because PMI firms are never going to engage in anything other than PMI and protection – why should they bail out firms who have advised on pensions?
“It’s unfair to tap up our sector which is responsible for few complaints and when the consequences are generally quite minor, compared to those who are advising on pensions and other investment products and perhaps even handling clients’ funds where the client can be left high and dry.
“In PMI, you’re not left high and dry, the contract is with you and the insurer, with the intermediary as an adviser. If they disappear, you are not left disadvantaged in any way.”
Consequently, Bjelobaba says everyone in the sector needs to make their voice heard – including trade bodies and every practitioner.
“You need to make it clear so fairness is restored,” he added. “It’s simply unfair and uncompetitive to have anything else.”