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Categories:Other,Regulation

MM leader: FSA needs to rein in its costs

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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.

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Readers' comments (7)

  • The foreward to the Statutory Code of Practice For Regulators (http://www.berr.gov.uk/files/file45019.pdf) states "Our expectation is that as regulators integrate the Code’s standards into their regulatory culture and processes, they will become more efficient and effective in their work. They will...............use their resources in a way that gets the most value out of the effort that they make, whilst delivering significant benefits to low risk and compliant businesses through
    better-focused inspection activity, increased use of advice for businesses, and lower compliance costs."

    So, as a regulatory body created by Statute, why is the FSA allowed to get away with ignoring totally the Statutory Code of Practice For Regulators?

    The root cause of most of the problems with the current regulatory framework, no matter what Hector Sants might say before the TSC, is lack of accountability. We, the regulated, are accountable to the regulator but the regulator is accountable to nobody. Surely, a healthy regulatory system should operate on the basis of quid pro quo? What we have at present is a manifestly UNhealthy regulatory system.

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  • The Regulatory Tsunami

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  • Therein lies the rub. No it does not. The fsa can do as it pleases. No one has the authority to stop it.
    Like it or loathe it that is the situation.
    Until the politicians realise we have a secondary tier of government within the uk, over which the elected tier has no control, the fsa will continue to fleece those it regulates, under the guise of consumer protection, until we are bled dry.
    Nothing less than an act of parliament to bring this Leviathan under control will suffice.

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  • When I met with Hector Sants at his offices last year his introductory words to me was to the effect that the FSA is fully aware of the need to spend its funds sensibly and that it wasn't all 5 Star hotels.

    He then sat down and proceeded to scrawl on an FSA embossed notepad!

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  • Alan,spending funds sensibly, to the fsa, probably means deciding between Dom Perignon or Bollinger for the office party.
    To the average man/woman in the street it means turning the heating down a few notches,going without new shoes so the kids can have some, cutting back on luxuries like biscuits! and foregoing the family holiday until things hopefully start to improve.
    The fsa, champagne charlies, Sheila Nicolls, and Hector Sants of this world can not relate to Mr & Mrs average, who happen to be most of the clients we are trying to serve.

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  • Don't moan on here. Moan to your MP.

    How can they know what is going on if we don't tell them?

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  • We the poor underlings of the UK finacial system, have to do the bidding of the FSA, jump throgh hoops and advise clients we have to put our fees up, beacause, wait for it, we are not making enough mistakes to get finned.

    My wife and I work over 60 hours a week in Finacial services and its still beggers belif that we can't earn as much as middle management FSA staff, who turn up for work clock in and decide who to persecute next.

    We still can't see any way forward with RDR and so it look like we will be down and out leaving even higher fees and levies to be paid by those who are left to fight the good fight.

    As in may of the other blogs, the FSA need to wake up and smell the roses.

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