FT Adviser (04/06/2019) – The Personal Investment Management and Financial Advice Association is encouraging the regulator to look at its supervision work, warning ‘regulatory deficiencies’ were contributing to more claims from consumers.
In its response to the Financial Conduct Authority’s consultation on the impact of the Retail Distribution Review and the Financial Advice Market Review, seen by FTAdviser, the trade body stated it is concerned about a rise in scams which was undermining consumer confidence and increasing the cost borne by the industry.
It stated “regulatory deficiencies” were as much to blame for the trend as poor behaviour from firms.
The trade body gave the London Capital and Finance scandal as an example, arguing it was unclear whether or not victims believed themselves to be receiving financial advice and were acting accordingly.
“We would welcome stronger regulatory oversight in this area in particular,” it noted.
London Capital & Finance went into administration at the end of January, putting the funds of more than 14,000 bondholders at risk.
Ricky Chan, director and chartered financial planner at IFS Wealth & Pensions, agreed with the criticism made by Pimfa.
He said: “The FCA have got to take some responsibility for the rise in levies paid by firms and scandals such as LCF.
“Regarding the rise in levies, much of this relates to unregulated investments (typically via self invested personal pensions) and it’s my belief that these should not be made available to retail investors – a ban was ruled out by the FCA previously, so clearly this was a poor decision.
“Related to this are general costs for compliance and professional indemnity insurance, and over the years, most firms have seen this rise, leaving many less affluent clients underserved. This cannot be sustainable and surely was not the intention of RDR.”
On the increase in scandals, Mr Chan said the regulator “needs to be allocating more resources to work closely with IFAs and regulated financial services professionals, and enable an easier way for individuals and firms to report potential scams or scandals and poor practices that could lead to consumer detriment – and more importantly, to action to be taken by FCA”.