In today’s Westminster Hall debate on the regulation of independent financial advisers (IFAs), I called upon the Financial Conduct Authority (FCA) to create a fairer system for businesses, consumers and investors, which will ultimately hold to account financial advisors who have offered bad advice and raise the level of compensation.
There are, and always will be many examples, sadly of malpractice, incompetence or deception. To illustrate my point I referred to the shocking story of two constituents who have been in touch with me about their experiences with the same financial adviser. I first heard about these cases over a year ago and have since written to and met the Chief Executive of the FCA to draw his attention to it. It has been nine years since an initial complaint was first made to the FCA and seven years since the Financial Ombudsman ruled that the financial adviser had provided unsuitable advice to my constituents and others. The financial adviser was ordered to pay compensation of more than two million pounds but his company did not have the required personal professional indemnity insurance. The financial advisor then pheonixed his company by making it voluntarily insolvent and continued to trade until last week to offer financial advice under his new company, whilst remaining approved by the regulator.
The Financial Services Compensation Scheme (FSCS) is unable to help my constituents as their losses are above the £50,000 threshold. I am glad that the FCA is consulting on raising the threshold to £85,000 but for one of my constituents, who lost millions, this is of little consequence.
The FCA must take urgent action; it must take a larger proactive oversight role of the IFAs it regulates. It must also instigate a re-approval process so that advisers who provide unsuitable financial advice, which then depletes people’s livelihood, whilst uninsured, are held to account. The FCA must also be willing to hold IFAs to account where there is clear wrongdoing and impose fines and banning orders to provide disincentives for malpractice, incompetence and deception. The FCA must work with the FSCS and Ministers, if required, to revise and raise the level of the compensation scheme from the totally inappropriate current level of £50,000.
This has been a most traumatic experience for my constituents and the FCA must make sure that businesses, consumers and investors are treated fairly. I am co-chairman of the All Party Parliamentary Group (APPG) on Fair Business Banking and Finance and we are working with consumers, businesses and regulators to identify failings within the industry and put forward positive proposals for change. I shall continue working with the APPG, the FCA, the Government and other stakeholders to create a fairer system for all.