Citywire printed articles sponsored by:

View the article online at http://citywire.co.uk/new-model-adviser/article/a609627

Tenet lobbies for product tax to fund FSA and FSCS

by Jun Merrett on Aug 06, 2012 at 15:53

IFA network Tenet has called for a tax on financial products and investments as a means of funding the Financial Services Authority (FSA) and the Financial Services Compensation Scheme (FSCS).

Keith Richards, (pictured), Tenet group distribution and development director, has proposed that the FSA and FSCS could be part funded by a premium charged on products and investments and said this would result in fairer and more transparent outcomes than advisers factoring increases into their fees.

Richards said the premium would mean charging a percentage of investment or product contribution, similar to insurance premium tax on general insurance products.

The proposal is part of Tenet and Richards’ ongoing campaign to lobby MPs, aimed at highlighting the cost and potentially detrimental impact of financial regulation.

Richards said the impact of increasing costs on the adviser population could reach a 'crisis point' but that the product premium could be introduced as a short term measure.

Richards said: 'As an interim solution, we suggest consumers should pay a relative premium which is transparent and would apply to everyone, irrespective of distribution route. In a transparent and unbundled world, the consumer should understand the true cost of regulation and the price of the FSCS, which is a form of additional insurance to protect them that would otherwise continue to be fully factored into an adviser’s charging structure.'

'How the FSCS is funded is part of the wider issue regarding the overall cost of regulation and the impact it is having on the entire financial services sector and consumers alike.

'Costs seem set to continue increasing but, in a reducing industry, the impact on small and large firms is becoming untenable.’

Richards said the proceeds of the tax would be collected and allocated by the government to cover regulation costs, a compensation scheme and consumer financial education initiatives.

Email a friend

3 comments so far. Why not have your say?

I have been saying this in one form or another since 2004.

The current system is unjust and is not a good business model. The fact is it cannot be maintained, very shortly there will not be enough of us left, then they will introduce this as a great idea, until then I cannot see anyone within the regulators even trying.

As always there will be those that will say why should they pay and they do not want to. That said it is the law to have car insurance and when you do have a bunp, you are always very greatful.

The current system means we pay everyones premiums, this cannot be right.

report this

But will the FSA take any notice even of pressure from MP's, despite the claim on its website to accountable to Parliament? Quite a body of evidence suggests that it won't..

Hector Sants told the TSC last year that the FSMA 2000 affords the FSA freedom to do pretty much whatever it likes and that the only way that will change is if the TSC manages to get the Law changed.

The government has already declared that the FCA, like the FSA before it, will be accountable only to its own board.

FSA "consultations" are widely regarded as little better than hollow, token shams, with all responses kept firmly locked away rom prying eyes instead of being published for all to see and to debate in open forum ("an open and transparent regulator"? I hardly think so.)

And clearly the FSA doesn't give a damn about costs to the industry of anything to do with regulation, as seen with its totally phoney Cost:Benefit Analysis on the RDR (initially £600m but now nudging £2Bn). All calls to revisit the costs of the RDR have been steadfastly ignored, as have those to justify foisting £110m of costs onto the IFA sector for the failure of ArchCru (a provider let it not be forgotton).

I applaud Tenet's efforts and I have every respect for Keith's abilities as a negotiator and lobbyist, but the FSA doesn't listen and these endeavours don't go far enough. I've said it before many times but I think it bears saying again ~ what is really needed is an Independent Regulatory Oversight Committee with the unassailable authority over the FSA/FCA to say: This is wrong and you aren't going to do it.

report this

Andrew Dickson

Aug 07, 2012 at 10:20

Tenet are definitely doing the right thing. I support them 100%

Other issues such as a regulatory superviser or non-executive supervisory board for the FSA to stop the exec board running away with ill thought out regulatory measures, awarding themselves bonuses etc are red herrings at this stage.

Don't cloud the issue.

VOTE FOR A PRODUCT PREMIUM (TAX OR LEVY) TO STOP THE PRESENT SYSTEM UNFAIRLY TAXING THE BUSINESSES THAT DO BEHAVE THEMSELVES.

report this

Please sign in here or register here to comment. It is free to register and only takes a minute or two.