By capping compensation levels APFA also believes that consumers will assume greater responsibility for their decisions.
Compensation should not be total, but a percentage of the amount invested beyond £30,000. These changes would not only reduce the FSCS bill but would also create more engaged and prudent consumers, the report said.
Fair and workable solution
Chris Hannant, director general of APFA, said: “A product levy is a fair and workable solution. I believe it is the most equitable way to fund a compensation system as it does not penalise innocent firms, allows financial stability and also drives better outcomes for consumers.
“In the context of [the Financial Advice Market Review], this is the right time to consider what is the right scale of redress. The current system has a tendency to compensate consumers who have invested in high risk products at the expense of those who have chosen lower risk ones.
“Creating a ‘whitelist’ of products and capping compensation levels would not only promote greater consumer responsibility, but would also lower the overall costs of adviser firms, increasing accessibility of financial advice to a wider market and make a significant step towards the aims and goals of FAMR,” Hannant added.
