PIMFA, the wealth management and financial advice trade association, has voiced concerns about plans to increase the maximum compensation the Financial Ombudsman Service can demand a financial services firm pays out to £350,000. 

The FCA’s proposed increase for the FOS will see maximum compensation levels rise from £150,000 to £350,000.

PIMFA says it is “deeply concerned” about the potential impact that the rise could have on the “competitiveness of the market and the advice gap.

Liz Field, PIMFA chief executive, said: “PIMFA are deeply concerned that this proposed move could act as a barrier to entry for smaller firms as this will impact a firm’s ability to obtain Professional Indemnity Insurance (PII) at a viable economic cost.

“This could reduce the number of firms within our profession and further widen the advice gap.

“We will be responding to the consultation paper and raising our concerns with FCA. Our profession has an essential role to play in helping to build a culture of savings and investments, and this move could severely impact firm’s ability to be able to provide this vital service to clients”.

However, other trade bodies representing financial providers, were more supportive of the FCA move.

UK Finance, which represents banks and building societies, said it welcomed plans to extend FOS access to more SMEs as it would help more firms unable to resolve issues with their provider find a solution.

The FCA plans to extend access to the Financial Ombudsman Service to more small and medium-sized enterprises and increase the compensation limit, saying there is wide support for the move. The compensation limit would also rise considerably in tandem with this change.

The changes will mean that SMEs with an annual turnover below Ј6.5m and fewer than 50 employees, or an annual balance sheet below Ј5m, will be able to refer unresolved complaints to the Ombudsman service. 

Under the ‘near-final’ rules published today around 210,000 additional UK SMEs will be eligible to complain to the Ombudsman service. 

The FCA says that respondents to the FCA’s January 2018 consultation strongly supported the extension of the Ombudsman service to larger SMEs, charities and trusts, and a new category of personal guarantors. 

PIMFA was created in 2017 by the merger of the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA).