Is your Financial Adviser also a Claims Manager?


Article by Phil

The Personal Finance Society (PFS) has expressed its concerns to the Financial Conduct Authority, that too many regulated financial advice firms are also registered as Claims Management Companies (CMC’s). It is four years now since the FCA took over regulation of CMC’s and its latest reports show that over fifty firms have both permissions.

The PFS is concerned about two aspects of dual regulation. The first are concerns about so called “phoenixing” where firms who have their advice permissions removed then turn into “poachers” bringing claims against their former selves, for their former clients who they had previously advised. The FCA is very keen to stamp out this practice. The second concern is about the ability of a dual regulated CMC to manage a Financial Ombudsman Service (FoS) or a Financial Services Compensation Scheme (FSCS) claim, in its capacity as a CMC, potentially against itself, in its capacity as an authorised financial advice firm.

Whilst there does not seem to be much evidence of this happening, regulators are right to be concerned about the potential for it to happen.

Having said that, it was the FCA which required advice firms to seek CMC permissions if they wanted to help their clients to handle complaints and claims for damages. This happens quite a lot, where an advice firms sees a client who has been wrongly advised and is potentially due compensation. Firms would normally have looked to assist the clients to make a claim, until the FCA changed the regulations. Now they (we) cannot help without being dual regulated as a CMC, which creates the potential for conflict already described.

So, whilst the FCA and PFS are right to be concerned, they should look at each firm on an individual basis. The fifty firms with dual authorisation represent a small proportion of the 650 firms registered as CMC’s.

For the record, as Financial Advisers we are not registered as a CMC, nor would we ever consider being a CMC.

Meanwhile the implementation of a cap on CMC fees is going ahead after an initial consultation period.

Redress band Consumer redress obtained (lower) Consumer redress obtained (upper) Max % rate of charge Max total fee
1 £1,000 £1,499 30% £420
2 £1,500 £9,999 28% £2,500
3 £10,000 £24,999 25% £5,000
4 £25,000 £49,999 20% £7,500
5 £50,000 n/a 15% £10,000


The fee bands are detailed here. This is good news for clients who can now be certain of the maximum costs of using a CMC.

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