James Hay warns clients: ‘We could pass FSCS levy to you’

IFAs to set up own accrediting body

I believe that IFAs as a separate profession and not related to product providers like Key Data should be in a compensation group of our own. I believe that we should initially found a level 4 and above accrediting body of our own in the terms set out by the FSA, initially to provide CPD checking, code of ethics practicing certificate etc but also in due course to engage with the media, the TSC, government itself and the regulator, FOS and FSCS in a reasoned level headed determined campaign funded by our subscriptions and waged by professionals whom our accrediting (or professional) body engages on our behalf to fight our corner. Is any IFA thinking along these lines—would any publication support the effort to set up an IFA owned and funded accrediting body?

Posted by: snooks

Well Done James hay

This is exactly correct. In the first instance, however it is paid, such a tax as the FSCS levy is a tax on our clients, not on us. This is because economies consist of people and things and companies and governments are just admin fictions we use to better organise outr lives. Ipso fatso our clients already pay the FSCS levy. It's one of the overheads of an FS business. Secondly it is about time that this was brought home to clients. That the fiction that the FSCS levy is paid by the industry should be exposed.

Posted by: Steve Farrall

Openended Liability

The FSA imposses an openended liability on all regulatede firms, therefore the FSA might find difficulty in objecting to firms passing on the liability to clients. The problem therefore becomes political and would probably force the FSA to reconsider the compensation scheme, for in reality it may be either the Adbviser firm goes out of business or the public pay. Obviously a small number of firms going bust is one thing, but what if it is a large number?

Posted by: M J Winfield

Well done James Hay

I'm delighted to see that James Hay has got the ball rolling as to how the costs of the FSCS are passed to the clients (the beneficiaries). The FSA won't object because they will agree that the levy is another business cost and all business costs should be reflected in what the customer pays for the good or service, just like VAT. In fact in the spirit of full disclosure and transparency the FSA would probably prefer to see the charge itemised to the customer than hidden among fixed/hourly fees.

Posted by: Green Eyed Monster

Oh really?

This is a bit of a fatuous article. Of course our clients pay these costs. We are not charities and if we are to retain our bottom line prices go up. I just charge more as a result of all the regulatory costs. I explain to my clients that if it wasn't for regulation the charge for my services would be about 20% less. I also point out that the charges I pay are not a lot difference to tax or Council tax. All three go to bolster fat cats first, and then with the little that's left they might see some benefit. As ever it's really all about 'jobs for the boys'. I'm not shy in enumerating the salaries and expenses paid to MPs, Council Officials and Regulators. Once that has been explained everyone is 'on side'.

Posted by: harry Katz

Information

Given that customers of James Hay have received this letter offering to levy an undisclosed amount 'as they see fit' from the accounts of customers, it might be useful to know on what basis and criteria they intend to exact this charge. Who will become liable for how much and for what reason would seem like reasonable questions for customers to ask. Very little has been said in this letter other than a rather odious 'you customers will pay whatever the circumstances'. This likes like a very good opportunity for competitors of James Hay to step in and bid for the custom on more reasonable terms and lay out their stall for business. Government bodies looking to industry to pay is not a new thing but the James Hay response looks like a very blunt instrument. Surely the IFA's who put their clients into these products bear most of the responsibility and the regulators themselves also have responsibility for taking their eyes off the ball. Let's have some more detail please before James Hay face an exodus of clientele.

Posted by: GOLFNUTS1

client's view

I am not an IFA but I do hold a James Hay SIPP and was drawn to this site when surfing for comment on the James Hay letter. As an investor I am greatly disturbed by the levies imposed by the regulators following the Keydata debacle. Innocent investment firms seem to be having to pay levies that are a very significant proportion of their profits. This mutualisation of liabilities created by a few bad apples is surely not a viable solution to the protection of investors who will no doubt end up paying in the longer term. I wholeheartedly endorse therefore any efforts by regulated firms to resolve the imposition of these levies which seem to be a cop-out for the regulators. Nevertheless, as a customer of James Hay I was appalled by the content of their letter of 14th February. My perhaps naive view is that James Hay are simply trustees of my pension fund (they describe themselves as administrators in the letter). They do not manage the investments in my fund. They hold some cash (on not very favourable rates) but apart from that they undertake some reporting duties, including regurgitating valuations prepared by my stockbrokers, and are obliged to discharge a duty of care as trustees, for which they receive fees. The sledgehammer content of the paragraph where they declare their right to recover from my product levies made on any of their companies by the FSCS or any (other) levy or tax on them or my product in such proportion as they may reasonably determine, took my breath away. The comment of Golfnuts1 above that this was “rather odious” is indeed restrained. Nor was I pleased to be referred simply to the literature section of their website for a copy of “the updated charges schedule” for my product. I shall be writing to James Hay accordingly. I would hope that some of the other commentators above, presumably IFA’s, who support James Hay’s efforts to tackle these levies also accept that my outrage at receiving a letter in those terms is justified.

Posted by: J knox