Chris Hannant, policy director at AIFA, said: “There has been a general acceptance that something has gone very wrong with FSCS funding and the onerous burden it has become for the sector. The FSA has made clear statements that the Compensation Scheme should be fair, affordable, durable, not volatile and based on affinity of activity. The current review needed to correct this imbalance.
“It is unclear how these limited reforms will correct these issues and we are disappointed that the FSA has not gone further in its review of the funding arrangements. Options such as pre funding have seemingly been rejected without being subject to public consultation.
“We’ll be seeking to reverse the proposed increase in the threshold for the investment intermediation class which will be a further blow for advisers who are struggling under the cost of regulation.
“The other fundamental issue with the Compensation Scheme has been the allocation of firms within each class. Recent examples have shown that some firms have been clearly placed in an inappropriate class. This review does not seem to address this fundamental issue.
“The results of this review have been eagerly awaited by the industry. But the result is somewhat disappointing.”
