News & Views

Death by FOS. Is this the end for smaller IFA businesses?

Panacea survey for Financial Advisers and Paraplanners

18 Oct 2018

Death by FOS. Is this the end for smaller IFA businesses?

The Financial Ombudsman service announced, on the 16th October, it is proposing that on 1 April 2019, yes, just 5 months away, “the ombudsman service’s £150,000 award limit should increase by 133% to:

  • £350,000 for complaints about acts or omissions by firms on or after 1 April 2019
  • £160,000 for complaints about acts or omissions by firms before 1 April 2019, and which are referred to the ombudsman service after that date

They also propose that, from 1 April 2020 onwards, both award limits should be automatically adjusted on 1 April to ensure they keep pace with inflation, as measured by the Consumer Prices Index (CPI). For any complaints referred to the ombudsman service before 1 April 2019 the limit will remain at £150,000”.

They say that “proposed changes to the ombudsman service’s award limit will ensure more complainants receive fair compensation when the ombudsman service upholds their complaint against a firm”.

You only have until the 21stDecember to respond to their consultation. You can email your responses to cp18-31@fca.org.ukor write to: James Tallack, Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN

Experience has shown that ‘a consultation’ in regulatory speak is simply a notification that the decision is made and this is just a polite ‘heads up’

We believe that this will see the end of smaller IFA firms due to impossible capital adequacy requirements caused by higher excesses to deal with £350k claims. It will be the end of anyone looking to start a new firm.

It will mean that PI premiums will get so high that only the largest firms could afford it.

And, you guessed it, more firms falling into FSCS default with fewer firms being left to pay the increasing calls for cash. Truly, this is the industry, sorry profession, that will destroy itself.

Panacea intends to ‘consult’ along with you. To assist us would you please complete this short questionnaire.

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