This would lend support sooner, when intermediaries face unusually high claims and could also reduce volatility year on year. It’s something to consider as part of the mix.
More radically, there’s a strong case for part of the FSCS to be funded from fines levied by the FCA on firms operating in markets covered by the scheme. Fines are currently paid to the Exchequer subject to the FCA retaining an element to cover certain enforcement costs.
These fines are often a result of failings on the part of regulated firms, which could lead to consumer detriment. There’s a strong alignment with what the FSCS is there to do - to compensate consumers who suffer financial loss as a result of industry failings, where the responsible firm is no longer in business.
This approach would extend the concept of ‘polluter pays’, offering a welcome reduction in the charge on well-run firms for the failings of others.
While FSCS levies might be thought of as an industry issue, if the cost of doing business rises, intermediaries have to pass this onto clients. So if we can reduce the FSCS levy burden on intermediaries, costs for advice and others services could also come down.
This would be welcomed by advisers and customers alike and would go some way to meeting the Government and regulator’s aim of closing the advice gap.
Supporting consumers to access affordable, professional financial advice should be top of our shared agenda.
Steven Cameron is director, regulatory strategy, for Aegon.
