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Advisers fear regulatory costs will hit clients hard


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.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. The industry is doomed guys. Crazy high costs/overheads, pressure on income and a society that doesn’t value the advice sector or savings culture. Will the last one out turn out the light please.

  2. Just increase your charges to cover the costs and do less work…….But let your clients know that they are paying 20% or so of their fees to cover their “costs of protection”.

  3. Julian Stevens 2nd April 2013 at 7:46 pm

    I read somewhere today that the number of authorised advisers fell by 20% between Dercember 2011 and December 2012. And more will go this yerar.

    How does that square with the FSA’s estimated acceptable attrition rate of between 8 and 13% (as stated by Hector Sants before the TSC in March 2011)?

    Not only was the FSA’s estimated cost of £600m for the RDR wildly wide of the mark (deliberately, many would say) but so too is the damage it’s causing in terms of the reducing number of practitioners available to provide quality financial planning advice to the public.

    Will the FCA commission a Benefits:Costs Analysis of its predecessor’s RDR? Given the almost certainly damning conclusions of such a report, namely that for the most part the RDR has been a massively costly yet damaging experiment, with no comeback on its progenitors (most of whom have moved on to even better paid jobs), the prospects seem poor.

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