RDR: Estimated compliance costs skyrocket
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The FSA’s estimated incremental compliance cost of the RDR has skyrocketed, with one-off costs rising from £430m to between £605m and £750m.
Its ongoing costs estimate has jumped up from £40m to between £170m and £205m.
The FSA says the incremental compliance costs for the first five years of the RDR is in the range of £1.4bn to £1.7bn. It previously estimated it to be £0.6bn.
This works out at between £305m and £370m per year, which the FSA says represents approximately 0.3 per cent of annual retail investment product new business.
The introduction of Adviser Charging is the largest cost category for intermediaries, with one-off costs estimated at between £140m and £160m, up from the previous estimate of £72m.
Ongoing costs, which were previously regarded as “negligible”, are now estimated at between £40m and £60m.
The FSA says the increase in cost is accounted for, in part, by higher estimates from firms of the costs of the required systems changes.
It says: “Banks, in particular, are expecting to make very significant changes. The revised estimates include the cost of advisers being trained to use new systems for adviser charging that were not identified as incremental compliance costs by firms when they responded to Deloitte’s survey for CP09/18.”
Professional qualifications will costs the industry between £115m and £165m, up from a previous estimation of £120m.
The FSA says: “The estimated average cost per adviser has increased, but the estimate of the proportion of advisers already qualified to QCF level four has also increased, partially off-setting the rise in average costs.
“However, we believe the estimates for total study time are likely to be an over-estimate because we assume that 370 hours of study is required at the top of our range and this is derived from OfQual guidelines, which assume no prior knowledge of the subject. We also believe this cost to be over-estimated because the costs of exam entry and study materials are likely to be lower than we are estimating, since we are aware that large companies are negotiating discounts.”
Disclosure documents and marketing costs are estimated to hit between £20m and £45m in one-off costs, up from £19m and the estimate of the on-going costs has stayed static at £25m.
The one-off costs of meeting independence requirements, such as re-drafting guidance for investment procedures, are estimated at £5m, but the FSA estimates on-going costs to rise to £35m, up from £16m.
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Readers' comments (9)
Anonymous | 26 Mar 2010 1:02 pm
Are we not surprised..... :-(
This is all getting a little out of hand.. £750 million.... to be funded by the very clients that evidently require a level playing field... (if the IFA's can get the money out of them..)..... madness..
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lol | 26 Mar 2010 1:34 pm
The Lunatics really are running the asylum!
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Anonymous | 26 Mar 2010 1:38 pm
"The FSA says the incremental compliance costs for the first five years of the RDR is in the range of £1.4bn to £1.7bn. It previously estimated it to be £0.6bn."
A miscalculation of £1billion. The mind boggles!
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Anonymous | 26 Mar 2010 2:01 pm
Legalised theft from a so-called Regulator that's supposed to be acting in the best interests of the Client.
The RDR Agenda:
1.) FSA introduces a series of draconian, unworkable and unviable measures under the guise of RDR.
2.) FSA tries to pass-on the cost of RDR to the very people who's businesses or incomes they have devastated.
3.) 2012 - or sooner: Mass-exodus (80%+) of the most experienced IFA'S from the insurance industry - some through early retirement (if they can afford it) and the rest, who (like me) have just had enough of "change for the sake of change!"
4.) The FSA, having eradicated the IFA as a meaningful source of advice to all but the very wealthy pass on the 'Distribution' od Financial Products through the Bank, Building Society and Post Offices (for excecution only).
Who's going to pay for these costs? Not me - my business can't sustain any additional costs - indeed with the demise of Commission, it will no longer be viable!
Who would like to welcome to our Industry the 'Spotty Graduate' IFA or Financial Adviser of the future? He's good at studying for his exams, but would you put your trust in someone as wet behind the ears as this? Someone without life-long experience who doesnt know how to wipe his own nose?
Why can't the FSA come clean and put it's cards on the table, disclose their hidden Agenda and let us know what the future holds?
The FSA is a Joke; the Financial Services Industry is a shambles and I've got a life to live!
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Anonymous | 26 Mar 2010 2:28 pm
As a previous poster said - up to 80% of IFA's will leave this business before the end of 2012.
The future? There is no future for IFA's. The Banks and Building Societies must laughing all the way to the ...bank!
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Steve Laird | 26 Mar 2010 2:29 pm
If you want rid of the FSA then do remember to vote Conservative. And no, I'm not a member!
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Anonymous | 26 Mar 2010 2:38 pm
Steve Laird- What makes you think the conservatives have any notion of getting rid of the fsa?
they are simply going to rebrand them as the CPA
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Incompetent Regulators Awards Team | 26 Mar 2010 2:49 pm
Top Steve Laird.
Nice idea but some of us are miles ahead. Mark Hoban has been given the task of overseeing the RDR which he insists will still take place regardless. He doesn't believe in commissions for IFAs although he seems to have overlooked how the banks do their dirty work. He said that his mother once got good advice from a bank, the mind boggles!!!
In my view he also needs to have Electric Shock Treatment alternatively he needs to be de-selected and replaced with someone with a working brain within his party. Then we may have a goer.
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Tim Gormley | 29 Mar 2010 11:45 am
IFA s need a more powerful voice most other professions would not tolerate this nonsense.
How about collectively refusing to co operate with the FSA untill they can prove they are treating Financial Advisers Fairly ( TFF) instead of TCF
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