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Article by Phil

The Financial Conduct Authority (FCA) plays a vital role in supervising the financial services industry. It is there to protect consumers by ensuring that firms work within a defined set of rules which have consumer protection at their heart.

Overall, it is a force for good, but it does let itself down on a pretty regular basis, which is very frustrating for advice firms like ours who do our very best to comply with the wide ranging and detailed rules. Here are some recent examples, that you won’t hear about in the mainstream press.

Did you know that last year the FCA “lost” almost 200 electronic devices, mainly laptops and tablets. They are unable to say what data was stored on these devices and whether any personal data was compromised. As you can imagine the FCA place very struct rules onto firms like ours to protect your data, so you’d think that they would apply these to themselves?

In its latest “consultation” the FCA is considering changes to way in which the Financial Services Compensation Scheme (FSCS) is funded. Its main thrust is to make firms hold more capital to pay for claims when they arise. It envisages firms who cause financial harm paying their own bills. It doesn’t seem to have to occurred to the FCA that those firms will have gone bust and that there won’t be any “capital” left in those businesses!

The industry has called for a product levy where a tiny fee is paid from every policy into a central fund. The cost of such a levy would be pennies, but the FCA refuses to consider a levy because it would be paid for by customers, regardless of the fact that customers pay far more in higher advice charges to meet the ever-increasing FCA fees. A vicious circle that the FCA seems completely unable to see.

On the pension front the FCA is convinced that there is widespread mis-selling going on in the defined benefit pension transfer market. This is despite regulating that particular market to death and requiring monthly reports every three months from firms on their activity. They have succeeded in cutting the number of firms dealing with these pension transfers in half. Now they have set up a separate website to encourage British Steel pension holders who transferred to make a claim against their adviser.

They have assumed that all those advised to transfer have been wrongly advised (at least 50% according to the FCA without seeing the cases) – how do you think that makes advice firms feel – all being tarred with the same brush. The reality is that of the 7,700 British Steel pensions transferred the Financial Ombudsman Service has so far received 390 complaints. That’s o.5% of cases or 1 in 20 cases.

The effect of these complaints will be to increase the PII costs to firms which will be passed on to clients. So, the net effect of the FCA’s actions has been to massively increase advice fees for clients and to make the availability of advice much more difficult to find. All this to protect a small number of clients that it “assumes” have suffered losses, when they should have been preventing those losses in the first place but didn’t.

Sometimes you really couldn’t make it up.

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