Under existing rules, the FSCS levy is paid by advisers depending on the ‘fee blocks’ each firm belongs to, which are in turn determined by the type of activity that firm carries out such as life or pensions intermediation.
AJ Bell’s study, which asked almost 700 UK advisers whether the FSCS levy should be reformed, found that 78% agreed that a ‘polluters pay’ system should be adopted where those who transact the riskiest business would pay the most to fund the lifeboat scheme.
Earlier this year, the Financial Advice Market Review (FAMR), a joint review by the Financial Conduct Authority (FCA) and the UK Treasury into how to make advice easier to access, called for the regulator to look at risk-based levies to fund the FSCS.
“Advisers are sending a message loud and clear to the regulator that the status quo, which often sees advisers with no complaints history whatsoever saddled with disproportionately huge FSCS levies, is no longer acceptable,” said Mike Morrison, head of platform technical at AJ Bell.
“Advisers have resoundingly backed the idea of a new levy model based on the risks of each individual advice firm. Moving to a ‘polluter pays’ system clearly has merits and we hope the FCA considers the views of those it regulates when deciding how to ensure the FSCS levy is fair and proportionate.”
Morrison also urged the FCA to help fund the FSCS, using the fines it collects, which are currently paid directly to the Treasury.
“In addition, it seems incongruous that all the fines paid by firms who are judged to have caused consumer detriment are funnelled out of the industry. We’d like to see a proportion of those fines used to reduce the FSCS levy and reduce the cost of regulation for advisers.
“This is one of the main barriers that gets in the way of a greater proportion of consumers having access to financial advice,” he said.
In August, a similar survey by the Association of Professional Financial Advisers (Apfa) found that nearly eight out of 10 (77%) UK advisers believe that product providers should contribute towards the cost of the FSCS levy on intermediaries.