IFAs have reacted angrily to news suggesting they may face an additional £9m bill in the Financial Serivces Compensation Scheme (FSCS) levy for endowment complaints received by the scheme this year.
Geoff Mason, of IFA Mason Associates, says:
"I am a small directly -regulated IFA. I remain so because I believe that I can offer my clients the best service this way. I have made a considerable investment in both money and time ensuring that I have the most up to date and compliant systems in place in order to provide freedom of choice for myself and my client.
"I have been running my business for five years and have never had a complaint or a claim made against me in connection with endowments of any kind – and yet I will have to contribute to the massive costs involved in meeting the growing number of claims.
"When is the FSCS going to scale its charges, at least in part, according to the number of claims made against any particular firm – such data is readily available from the FSA isn’t it?
"Come to that, you can include PI Insurers in that comment too. There is no voluntary membership of the FSCS available and it is therefore something I have no control over. It would appear to be yet again a case of the innocent and smallest underpinning the inefficiencies (or worse) of the biggest.
"Call me old fashioned, but I just wonder when I am going to stop getting clobbered for things I haven’t done, by organizations I have no control over and no voice in but am required to belong to in order to operate compliantly.
"Fees have increased steadily over the years as has the cost of PI Insurance, additionally there are constant regulatory changes and the commensurate administrative burden that ensues and the cost of compliance has spiraled.
"My clients (those people I see when I am not doing all of the above) are bombarded with ever growing forests of paperwork for even the simplest of transactions. Again, because I am small fry, I also have to disclose all of my personal assets and liabilities to the FSA to make sure that I have sufficient funds available to meet any future claims. Can you tell me of any other field of professional practice where this applies?
"I get squeezed at both ends of the tube – my costs increase dramatically year on year – yet my potential for earning is reduced year on year because of the constant restructuring of the marketplace. Is it just me, or are small IFAs being constructively, stealthily, yet definitely, being dismissed? What happened to treating the consumer fairly? Their choices and opportunities for whole-of-market independent advice from an individual they have an established relationship with are surely being gradually eroded by driving small firms to the wall.
"It’s not even as if my liability ends when I give up my practice – I say give up because who would want to buy into such an environment where my fairly sizeable client list, and dare I say it, efficiently run practice is viewed as a liability rather than as asset? "
IFA Bill Swaffield, says:
"I have been an IFA since 2001. I have never sold an endowment policy let alone mis-sold one. Why should I have to pay for the sins of previous advisers? I have had to pay £200 per month this year to the FSCS. How much next time? This is just another "stealth tax". Is this fair? Talk about 'treating customers fairly, what about fair treatment for advisers? It is becoming increasingly hard to make a living as an IFA without having extra charges."
Huw Tipton, of Cambridge Financial Planning, says:
"It still strikes me as completely unfair that some of us, who have no legacy issues, have to clean up the mess left behind by those who have now left the industry, presumably because they made so much out of selling expensive contracts.
"I have never sold an endowment, transferred an occupational or final salary pension scheme or had a complaint against me in 15 years, yet I'm being forced out of the industry because of the cost of other people's questionable advice. Is there another industry that effectively fines innocent people because of their association by profession?
David Penny, director at PhD Financial Management, says:
"Those in the industry who say they are representing us need to be asked to open their eyes. The life offices are running rough shod over IFAs and, seemingly, nobody has even noticed.
"You only have to look at the surrender values being quoted on endowment policies and do some sums against the projected maturity values and you will soon see the majority of companies are discounting the surrender value so the surrender of the policy ensures them all the charges they would otherwise have taken over the remaining life of the policy.
"Put another way, if you took the surrender value and invested it at the maturity projection rate and added to the accumulating funds all future premiums, without any deduction for expenses, then you would get to the projected maturity value. Some companies add insult to injury by discounting the surrender value even further. The investor compensation payment is based on the difference between the amount that would have been paid off the mortgage and this heavily discounted surrender value.
"The selling agent meeting the compensation bill is seriously disadvantaged as a result. Insurance companies are recouping their losses when policies are surrendered at these derisory discounted values. They hide behind their actuaries and the industry myth that the rest of us poor mortals cannot hope to understand the workings of the with-profits fund. How about we open our eyes and start doing a few sums? While we are at it, we might even question when it was that the life offices radically changed the product?
"The concept for the first 100 years was that with-profits worked because they were for endowment polices and the life office knew the level of premium income and the maturity date spread. Even a major stock market crash was a storm that was easy to ride. Then they introduced with-profits single premium investment bonds to the party - very cautiously at first as they did not wish to destabalise the funds. Then greed took over as with-profit bonds were easy to sell. They shoved out policy documents by the bucket load thinking 'let the public have as much as they like and with a bit of luck, the incumbent MD & IFA will be retired before the whole thing implodes' - as surely as it must and indeed has done.
"It is not the IFA who is to blame, nor even the tied reps. We all sold the excellent products presented to us. We trusted the company actuaries not to allow the destruction of the products. The life offices let us down and now they are hiding behind their ongoing mystique and still profiting from it. I think it's time for a little justice. Let the perpertrators pay the balance of the bill they are themselves even now inflating."IFAonline
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