PPI Claims Affect FSCS Growing Levy

27/01/2011 by admin.

Brokers are reeling at the colossal increase in bills they are being asked to pay to the Financial Services Compensation Scheme (FSCS) by way of its interim levy - some fear they may even go out of business.

Brewin Dolphin expects to face a £6m bill from the Financial Services Compensation Scheme (FSCS) as it collects its interim levy, this compares to the £1m the discretionary management group paid last year.Rival private client investment manager Charles Stanley has also confirmed to Citywire that it would be contributing £2.6m towards the levy this time round, after receiving its latest invoice from the FSCS. Advisers are incensed at the mammoth increases of up to 780% in the bills they have received from the FSCS compared to its interim levy last year.The FSCS felt it needed to raise its levy across the board following Payment Protection Insurance (PPI) misselling and the high profile collapse of Keydata Investment Services and Wills & Co which left thousands of investors out of pocket.

FSCS confirmed it would raise a record £326m for its interim levy, due to the collapse of Keydata Investment Services, Wills & Co and other investment firms. £93m is to be raised from the investment intermediation sub-class, which includes advisers, with £233m to be raised from fund managers.The FSCS has implemented a radical shake-up of the way it calculates firms’ contributions to the levies it imposes, which changes the measure from the number of registered individuals at a firm to the amount of ‘eligible income’.However the FSCS has been accused of not making it clear to advisers how and when the charges would be imposed.The adviser community has been thrown into confusion with some of the giant rises in bills it has imposed, and left many with a nightmare scenario of facing a one-month deadline to pay bills that vastly exceed expectations.

Many brokers feel the vast rises are unjustified and that the FSA should take a large part of the blame for increased compensation claims for not adequately policing the sale of ppi claims for not properly monitoring rogue firms.

The cost of ppi claims means all brokers are facing massive fee increases which critics say proves the structure of the compensation scheme is totally flawed. The majority of good practioners in the industry are paying for the sins of the bad.

Many feel the FSA should have been far more vigilent in the first place on the types of product sold on the market.

Source: David Burrows. AOL Daily Finance

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