Aifa urges IFAs to respond to FSA fees consultation
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The Association of Independent Financial Advisers is urging all members to respond to the FSA’s fees consultation, which closes to submissions on Monday.
AIFA is challenging the basis on which the regulator sets its budget, including how it is apportioned, and is encouraging members to support its campaign.
To contribute to its submission, Aifa has employed a firm of forensic economists to assist with the analysis of FSA’s budget and its allocation across the industry.
Aifa director of policy Andrew Strange says: “The way the regulator allocates costs is in urgent need of a fundamental overhaul. At present, the model used by FSA can only allocate 50 per cent of their costs directly to the fee blocks. FSA needs to revamp the cost allocation model so that it reasonably allocates the indirect 50 per cent of costs to the right activities and firms.
“It is estimated that the net revenues of IFA firms represent something in the region of 2 per cent of the revenues of the financial markets regulated by the FSA. However, advisory firms pay 25 per cent of FSA’s total costs. IFAs are therefore burdened with a disproportionate and unfair share of the costs of regulation which are ultimately and inevitably met by consumers.
“FSA must consider the impact that fee increases will have on intermediary firms. The regulator is increasing the cost of advice and therefore the fees that IFAs have to charge for their advice.”
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Readers' comments (2)
Man in Black | 8 Apr 2010 1:32 pm
There's also the small issue of a regulator focused on IFA could be run out of Leeds or somewhere provincial for a fraction of the cost...The only excuse for the FSA being in London is the location of the Banks...
Any provincial city has everything the FSA would need to regulate IFAs - other than unskilled immigrant labour manning the call centre with broken English, of course.
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Julian Stevens | 8 Apr 2010 9:50 pm
If I believed it would make the slightest difference, I would indeed respond. But the fact is, as AIFA should well know, that the FSA is a law unto itself and basically does whatever it likes. It certainly doesn't bother taking the slightest notice of the Statutory Code of Practice for Regulators, as reported elsewhere in this issue.
For example, the Code states "Regulators should create effective consultation and feedback opportunities to enable
continuing cooperative relationships with regulated entities and other interested parties." When did anyone but the FSA itself consider that requirement to have been observed? Some spokesperson is quoted as saying the FSA has consulted the industry and taken on board the feedback received, but nobody believes such statements and the lack of veracity of such claims is effectively unchallengeable. Any attempts to question such claims would merely be ignored or dismissed and there'd be nothing you could do about it.
The fundamental problem, of course, is that the FSA itself is a totally unregulated entity. Even though a statutory code exists, not only does the FSA routinely and totally ignore it, but nobody holds it to account for so doing. So whilst there is in fact a regulator of the regulator, it seems to be even more asleep at the wheel than the FSA has been accused (by the Treasury Select Committee) of being in the past.
Things have to change and the only way such change will be brought about is by way of a legal challenge. If AIFA doesn't have the stomach or the backbone for it, then at least we can be fairly confident that the Adviser Alliance has. Join now.
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