In November, the FSA proposed changes to the structure of fees for regulated firms.
The proposals would lower minimum annual fees for IFAs from £1,850 to approximately £1,000 – a cut of 45.9 per cent.
But Aifa says the revised fee structure does not accurately reflect the risk posed by the IFA and intermediary sector.
It says deposit takers such as banks account for 28.5 per cent of the FSA’s 2009/10 annual funding requirement, while the intermediary sector account for 19.2 per cent.
Aifa says life companies and fund managers are paying disproportionately low fees at 12.2 per cent and 7.8 per cent respectively.
Aifa director general Chris Cummings (pictured) says: “An opportunity has been lost to examine the true cost of regulating the financial services community. The investment and mortgage intermediary sectors now generate almost one-fifth of the FSA’s fees income. These firms do not present systemic risk.
“By comparison, the banks are paying remarkably little in fees according to the FSA’s statistics and not enough to cover the cost of the degree of regulation that is warranted by the systemic risk they present.”
Cummings says Aifa supports the reduction in fees for small IFA firms, the increased costs for larger firms cannot be justified.
He adds: “We would also encourage the FSA to use the tools at its disposal to reward firms that invest in their business and its people. For example, regulatory dividends could be linked to aspects of the retail distribution review such as altering FSA fees for advisers who are at or beyond QCF level four.
“This would mitigate the costs of regulatory change for firms that have made the substantial effort to invest in their staff and would encourage firms to progress through ‘milestones’ linked to dividends.”