A new survey from TMA Mortgage Club has found that Directly Authorised advisers (DAs) are unhappy with how the Financial Services Compensation Scheme (FSCS) is funded and do not believe the FCA’s consultation offers a suitable alternative.
During the FCA consultation period for the way the FSCS levy is funded, TMA polled its DAs in a sample survey of its premier members for their thoughts on its current set up. The survey of 62 Directly Authorised firms shows that 93% believe the current FSCS levy is unfair to brokers and intermediaries who are not licensed to sell pensions products.
Currently, the FSCS levy puts life and pensions in the same class, meaning that brokers who solely advise on mortgages and protection are paying to insure pensions products. As such, the survey also reveals an overwhelming 98% of DAs agree that the compensation funds for life products should be separated.
David Copland (pictured), director of TMA Mortgage Club, said: “Despite the FCA acknowledging there are flaws with the FSCS, the proposed changes will continue to leave mortgage and protection brokers at a disadvantage. The majority of our advisers are not licensed to sell pension related products, yet they are consistently penalised and required to pay for poor advice given.
“The only way we can make a change is by sharing our views with the FCA. We therefore urge our members to respond to the current consultation before the end of the month.”
TMA is calling on brokers to share their opinions by responding to the FCA consultation paper on the way the current FSCS is funded. Brokers have until 31 March to respond and can do so by visiting the FCA website and answering Q14: What are your views on the different funding classes we have set out here? Do you have any alternative proposals?
Stephen Brockman, mortgage broker at A2B Mortgage, added: “It’s unfair that the FCA is holding mortgage brokers accountable for the poor advice of others. We’re not licensed to sell products with an investment element so we shouldn’t have to pay into a pot to bail out brokers who do.
“The levy should be split to account for the difference in low and high risk products. For instance, it could be divided into two sub-sections; one for non-investment product sellers and another high risk one for sellers of investment products and pensions. Firms would then be charged fees according to the type of product sold and the level of potential risk. This currently isn’t an option, so all in the industry that are affected by this need to make their voices heard and should respond to the consultation.”
TMA believes the FCA should replace compensation fees with a product levy, weighted against the riskiness of the product being sold; something most DAs agree with. 95% of DAs polled by TMA Mortgage Club say that this would be the best alternative option.