A recent article on the ability of former advisers to reinvent themselves as ambulance chasers brought to mind the proverb that ‘a wolf in sheep’s clothing is still a wolf’.
This is of particular importance now that claims management companies have to be regulated by the Financial Conduct Authority.
When I wrote about this change, I did not think all advisers grasped its real significance.
I also expressed my disappointment that the ambulance chasers were not going to be required to contribute to the Financial Services Compensation Scheme levy; something I still feel is totally wrong in principle, and I have yet to see a clear statement from the FCA as to why they should be excluded from paying the levy.
The only implied FCA argument is that that it would not be fair, which, frankly, is the same argument that the FCA has consistently ignored as far as advisers are concerned, from whom the levy is, and always has been, unfairly demanded.
When considering whether or not to authorise an ambulance chaser, it is now the responsibility of the regulator to ensure CMCs are fit and proper.
I sincerely hope the FCA will look carefully at past records, business plans and structure. It will be interesting to see how many of the numerous CMCs who have applied for authorisation are actually able to achieve it.
One important factor that the FCA must take into consideration is if the CMC has ever been authorised in a different type of business, especially as it appears that many of today’s CMCs were previously advisers who have lost their authorisation.
One example is an adviser who lost clients millions by putting their self-invested personal pension monies into unauthorised investments, but now wants to be authorised as a CMC.
It would make an absolute mockery of regulation if people who could no longer gain authorisation as advisers could sneak back into the financial sector by becoming authorised under the guise of a CMC.
In the same way that a wolf in sheep’s clothing is still a wolf, the reality is that one cannot make a silk purse out of a sow’s ear.
Financial advisers should – rightly – look to the FCA to live up to its responsibilities for good consumer outcomes and ensure that the authorisation of CMCs is at least as strict a process as is applied to financial advisers.
Ken Davy is chairman of SimplyBiz group