EDRs require long notice period

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[UPDATED WITH FDR COMMENT] Concerns have been raised over the long notice period that advisers must give to change dispute providers.

Friday, December 20th 2013, 6:46AM 4 Comments

by Susan Edmunds

Both FSCL and ISO require 12 months’ notice before a financial services provider can transfer to a different scheme.

FDR requires three months' notice. 

The Banking Ombudsman scheme only caters for advisers who work in banks.

Adviser Kym Koloni was upset at how difficult it was to change to a new provider.

She is part of Newpark and decided to change from the ISO scheme to FSCL after a presentation. Her invoice from ISO said that if she did not pay, her membership would be terminated, so she told them that she had decided to change.

It was then she was told that she had to give a year’s notice. “It’s anti-competitive. FSCL said ‘pay [ISO’s] invoice and we’ll waive your first year of fees but if I want to swap, why can’t I?”

She said advisers had been inundated with paperwork when regulation took hold and many had not seen the EDRs’ fine print, which states what is required to end an agreement.

“It’s hard enough doing business with stuff like this where you can’t swap between schemes. FSCL said it was because you might get a big group like Newpark saying ‘you’ll get a better deal here’ and having everyone switch, but welcome to life in the business world. You can’t use that as an excuse.”

FSCL chief executive Susan Taylor said her organisation required 12 months’ notice because it was not-for-profit and budgets had to be done carefully at the beginning of each financial year based on the number of participants and the fee income received.

“We require some certainty on income, particularly when we reduce fees such as we did this financial year. Having said this, if an adviser has a genuine reason for leaving, for example is leaving the industry or has changed dealer group/employer and that dealer group/employer is with another scheme, we will not enforce the full 12 months’ notice period.”

FDR scheme manager Stuart Ayres said his scheme had considered requiring 12 months' notice but it had been decided that it was not fair. "It's anti-competitive and draconian."

Insurance and Savings Ombudsman Karen Stevens said the 12-month notice period was also to protect consumers. “[It] means if an adviser or other financial service provider suddenly ceases business or swaps ERD schemes, consumers can still make a complaint to the ISO Scheme. While most advisers will not have any complaints in this period, the new regulatory environment was introduced to protect consumers and this is what the 12-month notice period aims to do.”

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