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To safeguard your investments it pays to get financial products advice from a trusted independent financial adviser (IFA). But if things do go wrong with financial products, it is good to know that there is a safety net in place to protect investors in some circumstances. In the UK, this is provided by the Financial Services Compensation Scheme (FSCS). The FSCS is the body currently being used by the Government to bail out investors in some of the firms that are experiencing problems arising from the banking crisis. The FSCS is an independent (though government created) institution formed under the Financial Services and Markets Act 2000. It is a compensation fund of last resort for the customers of financial firms that are regulated by the Financial Services Authority. The FSCS is funded by levies from the providers of financial services type products. The FSCS considers claims from investors against firms that have ceased to trade and where the firms, or their owners, are unable, or likely to be unable, to meet those claims. There are strict limits to the compensation amounts as shown in the table opposite. If you are in doubt, it would be prudent to contact the provider for limits on specific products or deposits held. Customers should be aware that the maximum limit will only be covered per authorised banking licence, not per brand of bank or building society under a parent company. There are, however, areas that are not covered. The FSCS does not consider any claims against firms that are still trading, which must be made in writing to the firm and could end up with the Financial Ombudsman. The types of contract and the maximum amount of compensation provided is detailed below. Deposit accounts: £50,000 per person per deposit firm or for joint accounts limited to £100,000 (Limit increased from £35,000 from 7 October 2008). Investments: £48,000 per person per investment firm 100% of first £30,000 and 90% of next £20,000. Mortgage advice and arranging: £48,000 per person calculated as 100% of first £30,000 and 90% of next £20,000. Long term insurance (including investment bonds): 100% of first £2,000 plus 90% of balance of claim. No actual monetary limit. Gemini Wealth Management are Independent Financial Advisers (IFA) that provide tax guidance, independent financial advice and other financial planning services for personal and business use in the UK. Gemini Wealth Management Ltd is Authorised and regulated by the Financial Services Authority Registered in England & Wales No. 5919877 Registered Office: Gemini House, 71 Park Road, Sutton Coldfield, West Midlands B73 6BT The Financial Services Authority does not regulate tax and trust advice, will writing and some forms of buy to let mortgages. The guidance and/or advice contained in this website is subject to regulatory regime and is therefore restricted to consumers based in the UK.
Chris Wathen is author of this article on Financial products advice. Find more information about Independent financial adviser here.
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