Rising Sipp complaints, among other issues, have pushed the Financial Services Compensation Scheme (FSCS) to raise its levy, resulting in unwelcome bills being sent to financial advisers.
The lifeboat scheme announced on 16 January that it needs to collect an additional £87m ($113.6m, €103m) for 2020/21.
Many financial advisers took to social media on Monday after receiving emails outlining the extra money they would need to pay.
They have been given just 30 days to settle the bill.
According to some social media posts, the levies ranged between £4,500 and £30,000.
Advisers said the contribution was calculated as 0.25% of their annual turnover.
One post lamented that the levy amounted to half the annual salary of a junior employee, who they hoped to hire, but won’t be able to because of the extra payment.
Growing pains
A spokesperson for the FSCS told International Adviser: “We recognise the industry’s concerns about the rising trends in compensation costs and that some have expressed their views about the cost of the additional levy bill.
“We appreciate they have the additional financial demands, but it’s important to note that our funding arrangements are set by the regulator.
“We are deeply conscious that without levy payers’ funding and support, FSCS cannot expect to carry out its remit.
“It is key for us to continue to work with the industry to help to reduce compensation costs, whilst avoiding consumer detriment and maintaining confidence in the financial services sector.”
IA asked the FSCS why the payment was required within 30 days, but the scheme did not provide a reason.
Industry detriment
The latest bill was a blow for many firms which have seen costs rising due to regulatory compliance, higher industry levies and growing professional indemnity (PI) insurance premiums.
One adviser suggested that if the levy model continues on this path, they might be forced to increase fees to stay afloat.
