FSA to overhaul IFA regulatory fees

28 October 2011 12:04 pm | By Natalie Holt

The FSA is proposing to change the basis on which it calculates adviser firms’ regulatory fees from the number of approved persons to a firm’s income.

The regulator has today published a consultation paper on policy proposals for regulatory fees and levies.

It says the move follows concerns that because the regulatory fees of certain fee blocks were based on the number of individuals in a firm, this did not take into account part-time working or job-sharing arrangements.

Fees for firms in the A.13 block, which includes most IFAs, are based on the number of approved persons registered under the CF30 function.

Until 2007, authorised persons were authorised under different customer functions such as investment adviser, pension transfer specialist and investment management. Authorised persons were allocated to different FSA fee blocks according to their customer function.

However this changed under Mifid in October 2007 which brought the different CF functions under the one CF30 function.

The regulator says this made it difficult to allocate authorised persons to fee blocks.

The FSA says: “Working with an obsolete tariff base is inefficient and generates more work for us and firms. We need to establish a fair and more efficient way of calculating the fees for these blocks.”

The FSA decided to replace the headcount basis with an income measure for calculating the Financial Services Compensation Scheme levy in 2008 and implemented the new income measure in 2010/11.

The FSA plans to implement the new tariff base for 2013/14, with data based on firms’ financial years ending during 2012.

Firms will be expected to report their ‘regulated income’, which the FSA defines as the net amount of income from advisory and consultancy charges, brokerages, fees commissions and related income from their regulated activities.

The total would include any interest from income related to regulated activities.

Rebates to customers would be excluded,  as would fees passed to other authorised firms.

The FSA acknowledges as the income reported will be based on earnings during 2012, firms’ first year of reported income  may include commissions which will have to stop post RDR. Income will also include ongoing commission from previous business for several years.

Firms will be able to report their income through section J of their RMAR regulatory return. The FSA will write separately to firms that do not report their tariff data through the RMAR.

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