Liz Field, chief executive of the Personal Investment Management Financial Advice Association (PIMFA), says that
“increasing levies and difficulties in obtaining PII represent an existential threat” to the members of her association. She adds that this “impacts on their ability to do business; their ability to plan ahead; their ability to grow” and that “the current state of affairs is clearly unsustainable and needs to be addressed head on from government, the Regulator and the FSCS.”
Her warning comes as PIMFA publishes a research paper entitled ‘A Rising Tide Lifts All Boats: Member Insights on FSCS and PII costs’.
The Association’s survey of its membership found that:
- 18% of respondents said Financial Services Compensation Scheme costs made up more than one-fifth of their expenditure, once fixed payroll and accommodation expenses had been accounted for
- 45% said their FSCS levy payments had more than doubled over the past five years
- 64% said they did not trust the FSCS to deliver fair outcomes for firms and consumers Specifically concerning professional indemnity insurance, the survey findings included:
- The average cost of a firm’s PI insurance, relative to their FSCS premiums, was 56%
- 26% of respondents said their PI premiums had more than doubled over the previous five years
- 56% said their PI cover contained significant restrictions, for example defined benefit pension transfers might not have been covered
- Just 17% said they were “very confident” they could secure affordable PI cover in the coming year
84 firms responded to the survey, of which 31 were small to medium sized financial advice firms and nine more were sole trader advisers. One respondent was a ‘large national IFA’, four were financial advice networks, six were stockbrokers and the remaining 33 were wealth managers.
Given the number of small firms responding, it was understandable that 30% reported an annual FSCS bill of less than £10,000, but for a small firm, this can still be a significant outlay. 24% paid between £10,000 and £50,000, 25% paid between £50,000 and £500,000, 7% paid between £500,000 and £1 million, another 7% paid between £1 million and £2 million, 2% paid between £2 million and £3 million and 5% paid more than £3 million.
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The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article