Advisers’ FSA fees will rise by an average of 10 per cent to educate the regulator’s staff about the move to principle-based regulation, fund its IT outsourcing and bankroll its financial capability work.
Aifa says the inflation-busting hike makes a mockery of the stated aim of the move to principles – to reduce the regulatory burden – as the rise is in part due to 50m being set aside to teach FSA staff how to adapt to principle-based regulation.
The FSA’s 2007/08 budget outlines plans to fund “more flexible and competitive levels of pay for our best people”, increasing bonuses for “exceptional performers” and doubling expenditure on training and development. However, it does plan to reduce its total staff by 300 by 2010.
The 10 per cent budget increase from 271.4m to 301.7m is due to the outsourcing of the regulator’s much criticised IT infrastructure to Fujitsu, costing 11.3m, a doubling of the industry’s bill for financial capability, from 9.7m to 17.1m, and 50m over 10 years for staff training on principles.
Fee rates for the block affecting most advisers will rise by 10.3 per cent, reflecting a 13.4 per cent increase in the fee block’s funding requirement, a 4.4 per cent increase in tariff data and a 8.6 per cent increase in adviser firms.
The 40 per cent of advisers classified as small firms benefit from paying a minimum fee and will see a 2.8 per cent rise.
Aifa director of public affairs Tracey Mullins says: “The selling point of the move to principles was the regulatory dividends and lessening of burden but we are seeing principles used as an excuse for raising fees. There are major questions around these increases that are given little scrutiny.”
FSA chief executive John Tiner says: “I realise that this level of increase will concern many of our fee-payers. However, the board is convinced this is necessary to increase our effectiveness and deliver our statutory objective.”