The Association of Professional Financial Advisers made the call this morning as it published its response to the FCA’s consultation paper on the review of FSCS funding.
This came as Aegon released results of a poll showing widespread dissatisfaction with the current approach to FSCS levies, with 63% of respondents considering them to be unfair.
Chris Hannant, APFA’s Director General, said: “APFA welcomes this review and welcomes the FCA’s acknowledgement of the scale and impact of FSCS levies on many firms and its acceptance that fundamental reform is needed.
“We are very much in favour of provider contributions as providers have a role to play in the distribution of their own products and should take on some of the responsibility, particularly in light of the product governance requirements under MiFID II.
“However I believe that reducing the amount of compensation should be a priority and that more can be done to prevent consumer losses in the first place by tightening the regulatory boundaries around unregulated products.
The Aegon poll of 150 advisers found 60% of advisers voicing concerns about both the level and volatility of levies.
Advisers were heavily in favour of a risk based solution, which would vary levies in line with the risks the firm is exposing the FSCS scheme to, with 81% advocating this change of approach.
An overwhelming 93% believed that firms involved with riskier unregulated products should pay a higher share of levies.
Three-quarters of advisers were also in favour of life and pension providers and platform companies paying a greater share of the bill linked to their product types, with similar support, 67%, calling for fund managers to contribute more for claims linked to investment aspects.
However, there was little support for advisers paying more for a few years, for example to build up a fund, to reduce future volatility, which supports the FCA’s reluctance to take that approach, with only 18% supporting this approach.
Mark Till, chief distribution officer at Aegon, said: “The findings offer important insights into intermediary views which we will share with the FCA as part of our consultation response.
“The FSCS levies are clearly an area of concern amongst intermediaries and there’s a real strength of feeling coming through. With Sipp claims last year resulting in £77m of compensation payments, in part due to investments in unregulated collective investment schemes, it’s no wonder there are strong calls for risk based levies.
“The FCA consultation is a real opportunity to improve the sustainability of the intermediary sector, one of the aims of the Financial Advice Market Review.”