Advisers warn the expected huge hike in regulatory fees will create a “downward spiral” as more firms are forced out of business and lead to higher charges being passed on to clients.
The Financial Conduct Authority published its business plan this week which sets its annual budget for 2013/14 at £432.1m.
The industry will pay £391.5m, due to £40.6m in retained FSA fines, and around 30 per cent will be paid by investment advisers, mortgage advisers and general insurance brokers.
This grouping of advisers paid a total of £87m towards the FSA budget this year but this will rise to £118.6m, a 36 per cent increase.
Pilot Financial Planning director Ian Thomas says: “You have to balance the protection of the consumer with the bigger picture, which is that regulatory costs drive firms out of business, which ends up creating a downward spiral.
“Taken in the round with the cost of the Financial Services Compensation Scheme levy, professional indemnity insurance and increasing capital adequacy requirements, this could be the straw that breaks the camel’s back for some businesses.”
He adds: “If we really are moving to a world of more professional advisers, then there should be less need for an overbearing regulator with higher costs, not more.”
Clearwater Financial Planning managing director Duncan Carter says: “No business can keep absorbing these kinds of costs. How do you square the circle of escalating costs while the FCA is pressuring firms to bring client costs down? What we are delivering has not changed, consumers do not feel any better protected, and yet the cost goes up and up.”
Investment Quorum chief executive Lee Robertson says: “This is a huge jump, particularly at a time when advisers are under pressure and some are disappearing altogether.”