AIFA campaigned three years ago to have the FSCS system completely overhauled and successfully saw a new structure and funding system installed.
Since AIFA began campaigning on the FSCS, the banking crisis has led to a collapse in the banking system. This has put a major strain on the FSCS. Currently, IFAs do not contribute towards meeting the costs of the banking crisis but, with the current structure, that may become a possibility in the years ahead. AIFA wishes to see a specific provision established which protects IFA firms from these costs.
The collapse of Square Mile, Pacific & Continental and Keydata in recent times is also a cause for concern. None of these firms were IFA businesses yet IFAs are being asked to pay for their mistakes. AIFA believes these firms should never have been authorised by FSA.
Chris Cummings, Director General of AIFA, said: "The FSCS review should focus on recognising the differences in the financial services market and not mixing businesses that are dissimilar. We would however also counsel against introducing false market distinctions and made this point when the ‘investment' class was separated from the ‘life and pensions' class.
"We wish to see a system where the ‘polluter pays' and this can be brought about by focusing on how firms exit the market, through leaving assets behind following an exit audit.
"The review should ensure that all firms within the value chain are recognised - so complaints about a poorly performing product do not only rest with an IFA but also include the product provider.
"Furthermore, the review of the FSCS only makes sense if it is done in association with a review of the FSA's authorisation process. If the regulator was more diligent about allowing firms into regulation, fewer would be so fragile to cause problems for the FSCS to resolve."
