The FSCS (Financial Services Compensation Scheme) deals with a huge amount of cases per year, but a number of these all come from the same firms. Some firms, regardless of their size, are clogging up the FSCS with hundreds of cases.
Some of the figure are striking. Cherish Wealth Management were a five man operation, yet have cost the FSCS £16 million in pay outs, with £11 million form SIPP’s alone, with more than 1600 cases going to the FSCS. Why would this be so high for one firm? Cherish wealth were one of the firms mentioned in an ITV documentary, so there was possibly more awareness for this firms practices than others over the last coupler of years.
However, other firms also have the dubious distinction of being consistently in the FSCS’s spotlight. Taylor & Taylor, based in Norwich, had ties to a connected investment scheme, the Vantage Investment Group. Through this, client money would be invested, in what was recently deemed to be fraudulent activity, with the brothers who ran the firm awaiting sentencing at the time of writing. The FSCS however has dealt with a huge number of cases regarding this firm already, with 176 complaints in total, of which 102 related to SIPP’s, meaning the FSCS has paid out more than £4.9 million, with more claims inevitably to follow.
Other firms have seen similar amounts of activity. The bill for Financial Page, and Henderson Carter Associates, came in at just over £5.7 million in February this year. Most the payments made related to the Aigo investment fund. Financial Page have had 215 claims processed against them, and Henderson Carter 120, with both firms having dozens of cases outstanding.
So looking at just these 4 firms, that’s 2,111 cases already reviewed, with plenty more to come for all of them. Familiarity certainly breeds contempt for the FSCS. Due to the fact they are funded by levies from Financial advisors, it’s reasonable for them to ask why their hard earned money is being used to compensate customers of “dodgy” IFA’s who are no longer solvent. Another £24 million levy was imposed earlier this year, with the total compensation amount in the field expected to be £146 million for the financial year.
With barely a handful of firms creating so much work for the FSCS, and costing advisors, and therefore customers, a huge amount of money, it’s pertinent to ask how this was allowed to happen. Although the Financial Conduct Authority has cautioned against unregulated collective investment schemes in the past, the likes of which these firms were largely guilty of, their reactive approach, rather than proactive, has led to several years of large scale mis-handling of client funds. Only as these cases have been appearing before the FSCS the last few years has all this come to light.
With potentially huge amount of SIPP cases still to be potentially brought, the numbers for these firms will surely rise, and other firms will likely also be shown to have provided unsuitable advice to a large number of their clients. It seems hugely unfair to other providers that they have to fund a seemingly endless amount of claims against a small number of firms, but under the current structure of the FSCS, plus a lack of decisive, early intervention form the FCA when it was required, this is what claims in this sector will be for the foreseeable future.