View more on these topics

Advisers hit back over paying for Budget guidance

No evidence that advisers will benefit from guidance guarantee, industry argues.

Advisers say the case for their contribution to the cost of the guidance guarantee remains “unproven” despite a significant reduction in the levy charged to the sector.

Last week, the FCA proposed a reduction in the levy paid by advisers from an initial proposal of 20-30 per cent of the costs to just 12 per cent.

The regulator says it recognises it is not clear whether advisers will benefit from the guidance guarantee and they should therefore pay less than firms such as banks and life insurers.

It says advisers who do not hold client money should pay 12 per cent of the costs, while deposit acceptors, life insurers, portfolio managers, fund managers and operators of pension schemes should pay 22 per cent each.

The FCA says: “We accept the point made by respondents that financial advisers will only benefit if, after using the guidance service, consumers seek advice from regulated financial advisers.

“We also accept it is clearer that product providers in the other fee blocks are more likely to benefit as the monies released through greater pension flexibility will be distributed amongst them.”

But Pilot Financial Planning director Ian Thomas says his firm is unlikely to benefit at all from the guidance service.

He says: “The type of clients who are suitable for my firm will have already sought advice. It will be very rare for me to get any new clients as a result, so this is just another cost which makes advice unaffordable for consumers.

“The case is unproven even at 12 per cent whether this will bring any additional clients. We have not seen the business case.”

Personal Finance Society chief executive Keith Richards says: “Advisers should not pay any more than they currently do. The significant marketing budget enjoyed by the Money Advice Service should be redeployed to fund the guidance guarantee.”

In July, the FCA proposed three options for allocating the levy across the five fee blocks: the first was to base it on the FCA’s annual funding allocation, which would have seen advisers pay the largest proportion of costs at 30 per cent.

The second option was to split the levy equally so each fee block pays 20 per cent of costs, and the third was to allocate costs in line with what retirement products and services consumers choose.

The cost of the levy is not yet known, but the Association of British Insurers has said it could be as high as £13m, while The Pensions Advisory Service says it could reach £20m.


Expert view

When the FCA first consulted on the pensions guidance levy, it put forward a number of options for allocating the cost which could have resulted in advisers picking up 20 to 30 per cent of the bill.

In Apfa’s view, and as we explained in our formal response, this was out of all proportion to the benefits that advisers were likely to see from the guidance service, and didn’t take account of the fact banks and providers were going to benefit far more on an ongoing basis than advisers were.

Following a meeting with the FCA, at which they acknowledged our concerns, we submitted further evidence that indicated the likelihood of people seeking regulated advice after a pensions guidance session was limited.

We are therefore pleased the FCA has acknowledged the strength of our arguments, as well as those of the adviser firms that responded to the consultation. Reducing the proportion allocated to advisers to 12 per ceent – which we estimate could mean a saving of between £2-4m for advisers – is a big step forward.

However, in our view this is not the end of the story. We believe this allocation still over-estimates the benefit advisers are likely to see as a result of the guidance service.

We will therefore be making sure HM Treasury and the FCA monitor carefully how many people take up the guidance, and what they go on to do next.

If the figures show regulated advisers are not benefiting from the guidance service, then we will be pressing the FCA for a further reduction in advisers’ share of the bill.

Chris Hannant is director general at Apfa


News and expert analysis straight to your inbox

Sign up


There are 9 comments at the moment, we would love to hear your opinion too.

  1. So if it costs our company £5000 (just a made up figure as so far I have no idea from the releases what the amount will be) and we get 2 people in the year requesting advice is the FCA happy that we charge each £2500 each for that advice plus our fees for our time etc?

    That would appear to be fair and in keeping with their fairness regime?

    I just hope the 2 who appear have larger pots than £20,000 (could be any ‘small pot size’) or it would be quite a hefty percentage of their pots.

  2. Its just a continual mickey take from these overpaid regulatory Jokers

  3. From my minds eye, its not just this guidance levy, its just the constant drain, the waste of money from the FCA, MAS levy, levy after levy from the FSCS, even the PI increases seem out of control (another 35% increase for me this year) its non stop.

    All from people (FCA) who have no concept (it seems) of budget or fairness, and my argument is if (and a big if) the FCA were truly independent they would tell George Osborne to sling his hook and use the fine money it collects for its intended purpose IE -: to reduce industry costs, and compensate those who have been wronged. If the government and / or treasury want our regulator for their own political means then they should bloody pay for it !!!! at the moment they have their cake and eat it, complete deniability if things go wrong, a clear avenue for blame, a means to their own political agendas, and very healthy revenue stream

    Personally the constant, hand or hands in my pockets has / is effecting the industry as a whole, and that is what’s stopping growth, innovation, stability and more worrying the potential for more un-ethical drivers to get more business through the doors….. its all self defeating

  4. Just one big joke is this, you have a cow so milk it every day. The only thing with these jokers is they do not look after the cow very well.

  5. @DH – I agree with you.
    The F-pack should never have been given immunity from paying damages when a case is upheld in court against them. Crown immunity was removed from HM Forces for good reason.
    The fines that the F-pack levy should remain at the F-pack and should never have been taken by the Treasury without prior consultation (taking something without someone’s agreement is in most civilized societies referred to as THEFT)
    To take it and give it to the Treasury whilst refusing to pay compensation for their own mistakes from the fines and to give their staff immunity is not justice.
    It is time this slide in to the world of George Orwell was stopped in it’s tracks.

  6. The Mongol empire expanded because they knew how to important to them a horse was.

    They rode it,
    They milked it
    they bled it and mixed the milk with the blood
    they fought and died on it for what they where trying to achieve
    The FCA do all the above, but forget the most important thing the Mongols learnt about 1,000 years ago….

    you have to feed it, care for it and treat it with respect/like a friend otherwise it will turn round and bite you like a camel.

  7. We are 4 months away from the launch of the guidance guarantee and yet we still have no clear understanding of the cost of this service (ABI thinks £13m TPAS thinks £20m) Seriously we don’t know the cost?!

    Any of the contributors to this site who were thinking of introducing a new service for their clients would have a very clear understanding of what the cost would be. And yet, Government, Treasury and at least on of the parties responsible for delivery seems clueless as to the magnitude of the cost involved.

    You really have to wonder about the calibre of the people who are making these decisions, they would not last a moment in the private sector

  8. Phil, whatever I say you state in a much better and refined way with graphic word pictures I could only dream of.

  9. Given that guidance is already available FOC from the great majority of RI’s, as part and parcel of their initial client meeting, what justification can there possibly be for us being forced to fund its provision by other, unregulated bodies, particularly as the conclusion of such guidance is almost certain to be to seek advice from an experienced and qualified RI? Has this not occurred to APFA? Maybe it has, but they decided there was unlikely to be any mileage in making representations that advisers shouldn’t have to pay anything at all for guidance to be provided by other parties.

    Okay, 12% is better than 20~30% but we still don’t know of what [total costs]. Does APFA or, come to that, does anyone? And, judging by the wildly disparate conclusions of assorted polls, nobody has any idea of just how many are likely to avail themselves of the GG as opposed to seeking out a local adviser. What will happen if the industry is bled millions of pounds to set up various GG services of which only a few hundred people actually avail themselves? Will it be another case of the powers that be merely shrugging their shoulders and declaring Oh well, we weren’t to know it was all going to flop, we just followed instructions from the Treasury? A pound to a penny we won’t get any refund.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm