The complaints records may well be a fairer way of calculating the levies. It could be argued that a firm that has complaints upheld by the Financial Ombudsman Service has caused customer detriment. This may well be an indicator that the firm’s business quality may not be good enough. If a firm has too many complaints, then it will struggle to obtain PI cover and therefore may stop trading. Or the level of compensation payments may well cause it to stop trading. Either way, further claims are likely to end up being covered by the FSCS.
The FCA changed the complaints recording and reporting rules in June. This will lead to more accurate records of complaints being visible to the FCA as complaints are recorded in the Gabriel returns. The firms with significant complaint histories should be treated differently to those that make ‘nil returns’ year after year.
Either way, the system is still largely funded by firms that are behaving well and giving good client outcomes. This should be changed to ensure that higher-risk firms pay more into the system.
Tony Catt is a compliance consultant
Key Points
In July, the FSCS announced that some 47,000 people turned to FSCS in the 12 months to March.
The unpredictable nature of the FSCS levy makes it hard for financial adviser firms to plan. effectively.
Consumer protection is paramount, but the problem is, who should pay for it.
