On Tuesday morning we received an invoice for just over £10,000, for payment within 30 days.
This was our invoice for the Financial Services Compensation Scheme (FSCS) interim levy, to pay towards compensation for investors in failed investment schemes such as Keydata Investment Services.
The £10,000 invoice came as a bit of a shock.
Our best estimate for this invoice was in the region of £3,000, based on the total amount raised by the interim levy last April and the size of our invoice on that occasion.
Later that day I attended the Surrey branch meeting of the Institute of Financial Planning (IFP) and spoke with a dozen other IFA principals where I discovered similar leaps in amounts being invoiced for the FSCS interim levy.
It wasn’t until Wednesday afternoon that we were able to establish why we had experienced this 7.5 fold increase.
Back in 2008, the calculation basis for the FSCS was changed from number of financial advisers to the amount of investment intermediation income reported by the firm. This was the first time this new calculation basis had been applied to a levy.
We absolutely support the aims of the FSCS in terms of consumer confidence and security. What we can longer support is the way in which the cost of compensation is so unfairly charged to firms, such as Informed Choice, that had no connection with the failure of Keydata or the sale of this type of high-risk product.
As well as a significant business expense, at around 1% of our projected turnover this year, this is a direct cost for our clients and the clients of every IFA firm in this country.
On Thursday morning we started to gather signatures from other IFA principals who agree with us that the funding mechanism for the Financial Services Compensation Scheme needs to be urgently reviewed.
On Friday afternoon we sent an open letter to the heads of the FSA and FSCS, and Mark Hoban MP, Financial Secretary to the Treasury. This open-letter now has over 100 signatures. You can read it here.
We have also created a campaign website at www.fscslevyactiongroup.co.uk and we are encouraging other IFA firms to support this campaign to encourage the FSA to take immediate steps to ensure that processes associated with the Financial Services Compensation Scheme are seen by all to be fair, reasonable and transparent.
Today, we are also asking for your support.
Please take a minute to read and sign the online petition we have created at www.fscslevyactiongroup.co.uk/petition.
We aim to get at least 1,000 signatures on this petition before submitting it to the FSA and Treasury on Thursday 17th February 2011, shortly before our £10,000 invoice is due to be paid.
No business should be expected to pay such significant and unexpected costs, particulary in the current economic climate. Whilst we have the financial resources to meet the cost of this interim levy, we are very concerned about the health of the IFA sector both now and in the future whilst this current system remains in force.
Please support our FSCS campaign by signing the petition today.
