The financial services sector is subject to strict monitoring and regulations – designed to prevent some of the excesses and dubious practices of the past.
The emphasis is on protecting anyone who seeks financial advice of any kind, to ensure that their best interests are the priority.
At one time, it was possible for an advisor to recommend the best investment products, not based on your status and expectations, but on which offering they had been commissioned to push.
The financial services sector has come a long way since then, but there are still ways to find yourself counting the cost of ill-informed or collapsing savings options or property investments, for example. Particularly if your bank or building society crashes.
Compensation Body for Savings and Investments
Customers of financial services organisations have a way to seek compensation if their chosen provider is unable to settle a credible claim – The Financial Services Compensation Service.
Check FSCS Compliance on Best Savings Rate
It’s important to note that the FSCS only covers you if the financial advice organisation or individual you used was an authorised provider – under the FCA and PRA in Britain.
The FSCS may also recognise some European firms if authorised to do so by UK state regulators.
Since its inception in 2001, the FSCS has paid out billions of pounds to millions of individuals who had valid claims against financial intermediaries.
It is funded by a levy to providers of financial advice – including banks, insurance firms, mortgage brokers and credit unions.
This means it is a free service for individuals and small businesses.
Seeking Compensation for Failed Savings
If you feel you have been given incorrect or misleading advice on investment, savings, insurance, stock deals, mortgage or endowment products, you should first contact the organisation that advised you.
They are obliged under their accreditation to investigate such complaints and provide compensation when it’s appropriate.
If they have a case to answer and your savings or investments hit a wall, it may be that they can’t pay compensation.
This happens, for example, when they have ceased trading or a bank is collapsing. In that case you can apply to the FSCS.
Once this organisation settles a credible claim, you transfer all obligations to the FSCS. You can’t seek any further redress from your financial advice provider.
There is a limit – which is currently controlled by an EU Directive. The FSCS will only pay out compensation to savers to a maximum of £85,000.