There are currently several financial advisers failing due to complaints made about defined benefit transfer advice for the British Steel Pension Scheme (BSPS) scandal where several rogue advisers transferred over 8,000 workers pension scheme to investment linked schemes as the BSPS going into liquidation. Much of the advice was found to be suitable but sadly there are also over 1,000 cases that were found not to be suitable, and compensation required.
This left many rogue advisers facing hundreds of complaints and compensation awards in the £millions. These rogue financial advisers then fail because they are unable to meet insurance policy excess of say £20,000 per claim on top of an inability to secure further insurance cover.
The problem being that claims that have arisen after an advisory firm has ‘gone under’ and no longer exists are referred to the Financial Services Compensation Scheme. The maximum award that can be made to a consumer for a failed/in-default financial adviser is just £85,000.
This means that even though many claimants are being successful in claims, the compensation level from the FSCS does not meet the compensation award and people are then ‘out of pocket’.
The FCA is currently consulting on increasing the maximum compensation for these types of claims where an adviser has closed and is in-default.
This is not entirely the fault of the adviser; it is also the fault of the FCA to spot rogue advisers processing and declaring thousands of pension transfers as part of their annual returns. Equally, it is the fault of the FCA that allows professional insurers to duck liabilities when claims are made after a firm has closed, thereby the FSCS and the remaining ‘good’ advisers paying compensation by annual levy to the FSCS.