PIMFA, a trade association for the wealth management and financial advice industry, has welcomed the Financial Conduct Authority’s (FCA) call for evidence on way to improve the consumer investment market.Tim Fassam, Director of Government Relations and Policy, says: “PIMFA welcomes many of the proposals outlined in this call for evidence – in particular many of the arguments made around the current system of compensation which mirror our constructive engagement with the FCA on these matters.
“However, the FCA needs to recognise that every customer who finds themselves in need of the Financial Services Compensation Scheme (FSCS) has had a poor outcome and an incredibly stressful experience; it is best for all if this can be avoided. In our view, there remains inadequate supervision of advice firms and this has led to significant market distortion whereby firms that represent the most harm are allowed to default their liabilities onto the FSCS and make prudent firms bear the cost.
“We continue to believe that unless the supervisory regime is fit for purpose, compensation costs will continue to rise regardless of their configuration. It is hard to see how, under the current system, the burden of these compensation costs will not continue to fall on prudent advice firms.”