Running a business is expensive. Renting an office, paying staff, covering utilities bills, buying computers and other essential technology and the myriad of support packages that go along with them. Including the industry-specific software needed to securely store personal data like names and addresses and, in our case, well over a million documents going back several decades.
On top of this, for a financial planning firm like Gibson Lamb, you need to add the cost of being regulated. There are direct costs such as regulatory fees and mandatory insurance (please don’t get me started on the mess that is the insurance marketplace for a firm like ours!), and then indirect costs like bespoke compliance advice to ensure we stay on top of the ever-changing rules and regulations.
We understand these costs and accept that they’re all necessary in a heavily regulated profession. However…
Our regulator the FCA kindly sent their invoice this week. The document breaks down the costs into various sections: the actual FCA fee, Gibson Lamb’s contribution towards the Financial Ombudsman Service, the Guidance levy (which funds the Money and Pensions Service) and the Financial Services Compensation Scheme levy (FSCS).
The FSCS levy enrages me.
It’s Gibson Lamb’s contribution to the industry-wide safety net that provides consumers with compensation if they are mis-sold a product by an advisory firm that then goes bust. Don’t get me wrong, that safety net is vital to the trust the public have in the industry and I’m glad it’s in place.
However, this levy represents 80% of the overall FCA invoice! Eighty percent!
In my opinion, if the regulator was doing a good job and ensuring members of the public don’t get sold inappropriate and unsuitable products, then there wouldn’t be such high demand on the FSCS, and the levy would be far more reasonable. One of the largest advisory firms in the UK published in their accounts that their levy in 2021 was £36million!
A few bad apples
Regulation started in 1987 and here we are 35 years later still seeing – if I may be so bold – cowboys and charlatans pretending to be professionals. Sometimes even the best run firms will fail, and consumers must be protected when this happens. But there are too many firms run unprofessionally and therefore always likely to fail, and it’s probably those firms that mis-sell the products which result in compensation being paid.
Over the past few years Gibson Lamb, along with many other firms, have written to our MPs to try and get the way the levy is funded reviewed, but we’re always knocked back with buck passing and excuses as to why things cannot change.
And so, we’re stuck with the current system, with the most responsible firms footing the bill for others’ carelessness. Rant over, for now, it’s made me feel much better! But rest assured that we’ll continue to work with other firms and industry bodies to make the way the FSCS is funded more suitable.