"Scottish Widows addresses FSCS funding issue" "Scottish Widows addresses FSCS funding issue"

28 Jun 2017

As regular readers of this column will know, I have campaigned for more than two decades for the regulator to radically change how the FSCS is funded.

I was therefore encouraged to note earlier this year that the FCA strongly indicated it recognised the injustice of the current funding method. With the tide against the unfairness gathering momentum, I am now delighted to see a thoughtful and constructive piece on the future funding of the FSCS from Ronnie Taylor, distribution director of Scottish Widows.

For such a respected provider to acknowledge the injustice of the current funding is an important milestone. I believe all of us involved in the advice sector should be very encouraged to see this unfairness being acknowledged, first by the FCA and now by such a major provider.  

Mr Taylor's article, which you can view in full on Scottish Widows’ website, recognises that providers have a significant part to play in contributing to a solution. They have the ability to identify and avoid market risks and therefore help to ensure that the FSCS funding falls to a greater extent on those providers and firms creating the liabilities.

Product providers, as well as clients, benefit substantially from the existence of a strong, vibrant and successful financial advice sector. This has previously been recognised by many providers who voluntarily contributed to the FSCS levy to ensure the advice sector was not disproportionately penalised.  

It was also clearly acknowledged by the PIA which, within a £100m cap, proposed that approximately 85 per cent should be met by the providers that benefited from the business placed by advisers.

Going forward, it will clearly be important that the core funding of the FSCS involves contributions from providers to ensure their market knowledge is used proactively to reduce the number of calls on the FSCS, combined, where possible, with a higher proportion of costs falling upon those involved in producing or promoting higher risk products.  

Sharing costs across the product providers’ value chain, while also using risk-based levies and improvements in professional indemnity cover to change the funding of the FSCS, has the potential to reduce its overall liabilities while dramatically, and rightly, reducing the costs to financial advisers.

My congratulations go to Scottish Widows and Mr Taylor on such a helpful and constructive contribution to this important debate.  

Ken Davy is chairman of The SimplyBiz Group


Testimonials

"We joined SimplyBiz in 2010, having been members of the Sesame Network in one guise or another for nearly 10 years. We decided to leave the network because we felt that in the latter years we were just a number and it was beginning to feel like being back at school!  I have to say that the SimplyBiz approach is totally refreshing and that we feel in control of our own business again, whilst still having a good robust compliance support provider to guide us. We have since recommended SimplyBiz to other colleagues and would have no hesitation in doing so again."

Grant Kingston
Braintree

Read More

Latest News

The vulnerability issue

December 12, 2017

Vital as it is to demonstrate compliance with the regulations on protecting vulnerable clients, writes Gary Kershaw, the FCA's guidelines really only formalise the warning signs advisers should be adept at reading.

Read more >

"Trouble finding an apprentice? Here's why"

December 06, 2017

Last week, we were informed of another stumbling block on the government’s disaster-filled path towards putting a viable apprenticeship funding plan in place.  

Read more >

"Enthusiasm, courage and goals lead to success"

November 27, 2017

By the time I left school at the age of 15, with no qualifications, I had been called a few choice names by my teachers and received many predictions about where my future lay.

Read more >

Staffcare relaunches as Zest and introduces cutting-edge employee benefits technology

November 22, 2017

Staffcare, one of the leading pioneers of the employee benefits market, today announced that it is relaunching its business as Zest and, simultaneously, launching its new benefits technology platform.

Read more >