Wednesday, 11 August 2021
James Sharp, retired founding director or TEn, shares his opinion on why a proposed annual levy on ARs amounts to a tax on small brokers.
Imagine a bare-chested Steve White standing atop barricades stretching across Bevis Marks, brandishing a Tricolour and loudly proclaiming the cause of Liberté, l’Egalité and, above all, la Fraternité?
As a founding director - now retired - of TEn, an AR network, I would hope the British Insurance Brokers’ Association (Biba) CEO would be inspired, as described above, by the FCA’s consideration of another ‘small broker tax’.
Admittedly, the bare-chested element of this may not be to everybody’s taste, however, as a method of protest, it is rather kinder on Steve than the radical alternative of self-immolation.
And what ‘small broker tax’ is this?
The FCA’s proposal of raising a £250 annual levy on every Appointed Representative (AR), specifically as it applies to Biba members, amounts to the selective taxation of, primarily, smaller brokers. Of course, the sole basis for this discrimination is the regulatory label attached to the afflicted firms, which status was itself conjured into existence for GI brokers in 2005, by the Financial Services Authority.
At the last count I am aware of, there are circa 23,411 ARs in the UK. However, probably less than 411 of them are members of a recognised GI network. There will be others that are simply subsidiaries of a larger broker and, a few more, generally one-man-bands, who trade under the wing of a variety of other brokers here and there.
I would be genuinely surprised if the general insurance broker segment, of the total AR tally, amounted to more than four or five percent.
These broker ARs, via their principal, report their income and pay their dues in exactly the same way as everybody else.
For every £1 of income generated by an AR broker, subsequently the FCA, FSCS and FOS receive precisely the same portion of it as they do from Marsh. So, why should ARs be clobbered with £250 extra, at the same a time as the regulatory takings from other brokers are set to become half of that previously predicted? Is this l’Egalité?
In 2005, when TEn opened its doors, we had shamelessly borrowed our concept of an AR network from that which was already established in the IFA market. So, in addition to the GI brokers as ARs, let us say there are 1,500 in addition, similarly dedicated IFAs and Mortgage Advisors, that share the same regulatory description.
This leaves us with approximately 21,000 car dealerships, veterinarians and others, many of whom, I suspect, rarely sell a GAP policy or a Kitty Cover and, consequently, may not do it properly when they do.
I wonder, is this the group that the FCA are really after?
If the FCA are seeking to reduce the numbers of the moderately inactive among the 21,000 above, then £250 p.a. seems like a perfectly good way of doing it. Unfortunately, as a device, it is a bit of a blunt instrument, especially as genuine GI brokers are likely to become very worked-up about it.
If my memory serves me well, sometime between 2005 and 2010, TEn joined Biba together with all its members, paying a supplementary contribution for each of them. I think the mechanics of it involve an annually updated declaration of the membership list. In this way, every AR gets the support of Biba, display the Biba logo, attend the conference and register themselves on the Find a Broker section of the Biba website.
Just like any other broker, because that is what they are.
Subsequently, I believe, one or two other AR networks, founded on the AR lines pioneered by TEn, have come to similar Biba membership arrangements. This might add-up to a collective of about 250 brokers and, roughly, 10% of Biba’s membership.
So, how can the FCA now spare themselves an outcry of indignation, the wrath of Steve White and, potentially, that of his equivalent persons in the IFA and Mortgage Advisory worlds?
Quite simply, they should make an exception. There is a clear distinction between GI Brokers, plus IFAs and Mortgage Advisors, many of whom hold professional qualifications, join industry associations, read Insurance Age, diligently do their CPD etc and, on the other hand, those who spend most of their day selling cars. A line in the sand can be drawn.
Anyway, I’m not too bothered, because I am confident that Steve will sort this out and, thereby, l’Egalité et la Fraternité will prevail.
Otherwise, the FCA, doubtless inadvertently, will have achieved – in the context of Biba members - the very opposite of Robin Hood’s mission statement in respect of wealth redistribution.
Originally published by Insurance Age.
Site map coming fairly soon...
...by mid-November probably.
The site map will be an aid to navigation around our various websites. Of course, these sites have just undergone a major structural update and things are still changing.
So, it’s a bit like when a supermarket periodically shifts things around, either, just for the hell of it, or, because they have decided to squeeze in a click & collect point, where the bread used to be.
As stuff relocates, consequently, leaving the signs above the ends of the aisles as they were before, could become confusing.
Our current situation here is very similar.
Mind you, whether before or after the reorganisation, you can never find the Tahini paste. You always have to ask.