MM leader: FSA needs to rein in its costs
While it is pleasing to see the FSA business plan confirm a cut in fees for many smaller firms, the relentless overall increase in regulatory budgets is of major concern.
When Lord Turner joined the FSA in 2008, he declared small IFAs had been paying too much for too long, yet there has been little evidence of the regulator addressing this issue.
The small cut in fees for small firms is welcome but pales into insignificance when set alongside recent Financial Services Compensation Scheme bills.
More generally, at a time when Government departments and local councils are suffering huge and painful budget cuts, it is incredible to see the FSA implementing a 10 per cent increase in its overall funding, from £454.7m in 2010/11 to £500.5m.
It appears the age of austerity has still not reached the Canary Wharf offices of the regulator. With the ability to levy the industry for whatever sums it sees fit, there is no sense that the same financial discipline being seen in Government and up and down the country is being deployed within the FSA.
The regulator will point out that fees overall are down, due to the revenues generated by fines, but that just masks the continued increase in budget.
It has unveiled a capping of headcount and a freeze on new regulatory initiatives but this has more to do with diverting funds towards the regulatory restructure than a general move to cut costs.
Endless increases in the budgets of the FSA, FSCS and Financial Ombudsman Service, from what regulators seem to believe to be a bottomless pit of industry money, are unacceptable.
Inevitably, regulatory fee increases are passed on to consumers through higher product and/or advice costs and this point should be well remembered by the FSA.
In this issue, IFA Philip Milton explains why he is introducing a specific extra client fee to pay for increased regulatory costs. This trend will be accelerated by the RDR changes to remuneration and increased transparency of costs.
The industry should be prepared to pay adequate sums to ensure well qualified and able staff are hired and given the right resources to regulate the sector properly.
However, the industry and, more importantly, consumers need a strong commitment from regulators that they will do all they can to keep future costs as low as possible.