An irate adviser has said the latest FSCS interim levy is tantamount to mafia-style "extortion" and thinks clients - not advisers - should pay for firms' failures through an investment warranty.
Advisers have been receiving invoices for their share of the £60m interim levy in the past few weeks.
It will pay for received and anticipated claims related to the collapses of MF Global, Keydata, CF Arch Cru and Wills & Co.
Applewood Wealth Management managing director Karl Hartey, who has received a bill of almost £6,000, described it as "ridiculous" advisers have to pay for the failure of products they have never recommended.
He has proposed a system where clients are given the option to buy a warranty on investment products at the point of sale to insure against product providers going bust.
"When you buy a television you can buy a warranty," he said. "And when you buy an investment you should be given the opportunity to buy a warranty on that investment - in other words you insure it."
The additional, standalone charge to the client would be a more transparent and fairer system and would not punish those advisers opting not to recommend risky investments, he said.
"The wrong people are paying this levy. The people who should be paying this levy are the people who benefit from these products - the clients. Not advisers."
He added the fact advisers are forced to pay the FSCS levy amounts to a "gun to the head" scenario.
"We have no choice - it is extortion," he said. "We have seen how the mafia take people's shops and say we will not burn down your shop if you pay us £1,000 a week. This is the equivalent stuff - you have to pay the money."
He also thinks the burden of responsibility should shift from advisers to product manufacturers.
"At the moment if something goes wrong with a product the adviser gets blamed - not the people who manufacture the products."
He compared the situation to the car industry - if a car has a fault it is up to the manufacturer to recall the model and fix the problem.
"Nobody goes back to the garage to sue the salesmen for selling the cars because the manufacturer takes responsibility," he said. "If they can do that with cars why can't they do it with financial products?"
The Applewood managing director also said if the regulator did the "decent thing" and pre-approved products there would be less high-profile investment failures.
Hartey's comments come on the back of another adviser describing the FSCS levy as "absolutely soul destroying" in a letter sent to staff.
Last month, the FSA proposed a raft of new rules to the FSCS which would likely lead to increased compensation costs and higher levies.
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