Majority of financial advice heads lack trust in FSCS, study finds

Sixty-four per cent of financial advice business owners and wealth management chief executives do not trust the Financial Services Compensation Scheme (FSCS) to deliver fair outcomes for consumers or their firms, according to a new PIMFA study.

A survey of 84 business owners and chief executives of member firms of PIMFA also revealed that levels of trust in the FSCS have remained unchanged, or have not improved, in the past five years for 60% of firms.

Results from the survey showed the extent to which the FSCS is putting firms under increased financial pressure, with 45% of member firm chief executives or business owners reporting increases in their FSCS levy bill of more than 100% in the last five years.

Another 82% of members said that FSCS costs now accounted for at least 20% of all outgoings, excluding payroll and accommodation costs.

Following the findings, PIMFA has urged the FCA and the Treasury to work more closely with firms to rebuild trust in the FSCS.

“The FSCS plays an absolutely vital role in protecting consumer savings and we recognise that the trust it engenders for consumers has a benefit to our firms,” PIMFA chief executive, Liz Field, commented.

“But the results presented in this survey point to a wider disconnect between a profession, which seeks to deliver the best possible outcome for consumers, and a regulatory system that most firms see as providing inadequate support at best, or failing both consumers and firms alike at worst.

“Every single person that has had to use the FSCS has suffered a bad outcome that it would have been much better to avoid. Government, regulators and industry must work together to ensure that, ultimately, policy is designed in such a way that in the future consumers only have to rely on the compensation scheme in extreme and unpredictable circumstances.”

Commenting on the findings, FSCS chief executive, Caroline Rainbird, responded: “We know that consumers have a high level of trust in FSCS and we want this to be mirrored by the advisory community.

“We are completely aligned with PIMFA in their view that every consumer who has to use our service has suffered a negative experience that they would subsequently like to have avoided.

“It is crucial to tackle the root causes of the problem, not just the symptoms, as this will lead to a sustained reduction in the levy and more relevantly for all concerned – including the industry – an increase in good outcomes for consumers. We will continue to meet regularly with all parts of the industry, including PIMFA, to help achieve these two important elements.”

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