As an authorised and regulated firm, Informed Choice absolutely holds to the view that advice we deliver to our clients must be suitable.
To ensure this happens we spend a good deal of time finding out about our clients’ needs and ensuring recommendations and actions we provide are suitable.
For example ensuring that not only is any risk we ask a client to take appropriate for them but that it is properly communicated to them.
Our regulator the Financial Conduct Authority (FCA) requires three things of us financially to back up our delivery of advice.
The FCA requires that we have suitable Professional Indemnity Insurance (PII) so that any errors or omissions that occur and result in a financial loss to our clients are covered by insurance.
I am pleased to say that we have never made a claim in our 19 year history and have no difficulty obtaining PI insurance on favourable terms due to our low-risk business model.
The FCA also requires that we maintain a state of “capital adequacy”; in other words we have to hold many thousands of pounds of available capital resource to pay any claims arising.
Finally we are required to pay levies to the Financial Services Compensation Scheme (FSCS).
This scheme pays out compensation to consumers who have been badly advised resulting in financial loss but whose adviser has gone into liquidation and doesn’t have the resources to pay compensation costs.
A robust consumer protection environment is important as it helps to instil consumer confidence. But we cannot help but think that this “triple lock” is not working.
Each year we are being subjected to increasing levies payable to the FSCS. This runs into tens of thousands of pounds.
The intermediary sector can be subject to claims of up to £150m a year and just in the last couple of days the FSCS has announced that it has paid out £25 million to investors who lost out in their investments in Arch cru, a further £29.6 million in respect of MF Global another fund manager, £16m in respect of WorldSpreads ( a spread betting company and you may well ask, as we do, what the connection is between a spread betting firm and a firm of Chartered Financial Planners like us!)
£6.5m on Pritchards a stockbroking firm and £1.8m on Keydata another fund manager masquerading as an intermediary.
If all these firms were meant to have suitable PI Insurance and to be capitally adequate, how come we have ended up paying for their claims?!
The “triple lock consumer protection” isn’t working, it is simply making it very difficult for firms to function and definitely raising costs for the end consumer.
This needs a radical and complete rethink by the FCA.
