The Association of Independent Financial Advisers (AIFA) has called on advisers to respond to the FSA’s consultation paper ‘Consumer redress scheme in respect of unsuitable advice to invest in Arch Cru funds’.
AIFA believes the scheme will have a detrimental effect on both advisers and consumers and is inviting advisers to share their views with the regulator.
“We have deep concerns about the proposed redress scheme and this apparent retrospective application of standards,” said Chris Hannant, policy director at AIFA.
“The FSA must also explain why a redress scheme is necessary and why it has dismissed the other options for consumer redress.
“Consumers have not been left in the lurch – they have the power to seek redress now. The FSA’s power to develop redress schemes was granted in order to tackle issues of industry wide systemic risk, such as PPI. It was not intended to be used for a single regulated entity such as Arch Cru. A redress scheme, in this instance, is therefore inappropriate and threatens to damage the long-term sustainability of the profession.
“The unfettered use of redress schemes is also simply not affordable for the profession. Compensation payments for this year could run to nearly three times what the FSA itself considers affordable. This is not to mention the effect schemes will have on Professional Indemnity Insurance premiums, excesses and exclusions.
“We are urging advisers to consider how this scheme will affect them, directly and indirectly, and to submit their thoughts to the FSA’s consultation. Advisers should consider the cost of reviewing files, as well as the impact the scheme will have on their insurance.
“The FSA must focus on regulatory responses that are fair and proportionate. This is neither, and we urge advisers to make sure their voice is heard by regulators.”
AIFA has written to members encouraging them to respond to the consultation. Responses should be sent to FSA at cp12_09@fsa.gov.uk
The full consultation paper can be viewed at http://www.fsa.gov.uk/library/policy/cp/2012/12-09.shtml