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Aifa calls for FSA review of adviser fees

The Association of Independent Financial Advisers has today called on the FSA to review the total cost of regulation and the proportion paid by intermediaries.

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.”

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Comments

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

  1. paolo standerwick 29th January 2010 at 2:26 pm

    Well done Chris, now please take it to the next stage with the FSA. e.g. IFAs don’t need to be regulated at all as we have less than 1% (FOS figures) of complaints upheld against us and most of us sell packaged products e.g. manufactured by providers. This will save both the IFA and the F-Pack wasting anymore time on regulating us.

    This will help re-kindle the long terms savings market which the F-Pack have managed to destroy all confidence in that the consumer used to have.

    Keep the pressure on.

  2. When the culture within the regulator has been inflamed by advisers who give them the impression that they have ‘serious issues’ it is no wonder the FSA uses up so much more of its limited resources on small firms who just so happen not to have the massive compliance departments the banks can spend their customers’ money on with the sole purpose of creating an impression that their ‘systems and procedures’ are hunky dory so there is no point taking a peek at what the bank advisers are doing on a daily basis. But there is isn’t there?

    Balanced? Proportional? Fair and reasonable?

    The system is flawed.

  3. The less than 1% of bank complaints figure – does that relate to regulated business? i.e. IFAs receive less than 1% of the complaints that banks do for Investment Advice, Term Assurance, Pensions etc? If it does then that’s an astonishing statistic.If however the figure relates to the TOTAL number of complaints that a bank gets (i.e. missed payments, swallowed cash cards, refused loans) compared to IFAs complaints, then that’s nonsensical – you aren’t comparing the same things.

    Hopefully someone can point me in right direction on this.

  4. Is this just more hot air?
    The FSA’s intermediary sector are the HMRC’s ‘car drivers’ – the soft touch to justifying an existence and generating more revenue.
    How long will it be before someone at the FSA wake’s up and realises that it is the Banks that wag the FSA – not the FSA calling ‘heel’ to the Banks.

  5. This link is to a copy of the FOS stats for 2008/09. It shows the banks responsible for 59% of complaints and IFA’s 3%.

    http://tinyurl.com/ovx57y

    Should the FSA fees not reflect the same proportions?

  6. Please don't show my name. Thanks. David Rogers 29th January 2010 at 11:19 pm

    The FSA’s treatment of IFAs reminds me of the way the Sunnis treat the Shia in Iraq.

    It’s hard to think of one thing which the FSA has done towards wealth creation for the consumer in the UK since its inception.

  7. Robert – I assume you are a banker by your defense. As a broker I work under full advice and recommendation unlike yourselves. Therefore my advice is under observation. Whereas banks just sell “own products”. At one point whole of market brokers were advising on the products of 100+ lenders, the vast majority without complaint. A lender has one product range. So in that context it is a fair comparison.
    Don’t even want to go into culprits behind world wide reccession – that would be too easy.
    Or even hording public funding instead of releasing appropriate products at appropriate rates to kick start the market instead of profiteering….the list goes on.
    However dual pricing another story. Even if we forget that lenders have shafted their distributors (the brokers) which in any business is unethical. What about the public perception of “whole of market” and the confusion that has led to. I want to get paid for what I do (unfair?) sometimes that means I dont get paid for the work I do if I recommend a direct product. Client happy. Bank happy. Broker?? Sometimes I work for nothing for my clients when I arrange a mortgage does a lender/ do the FSA?

    And the FSA want to play beat the broker – wouldn’t it be nice if they directed their resources to the true issue and let us brokers get on with giving “best advice”

  8. Whenever dual pricing is mentioned it just shows up the unthinking, double standards that brokers apply to these debates. Dual pricing has been around for very many years. Up until 2007 it was very much in favour of the broker, with many products and special pricing available through networks and clubs that were not available to branch staff. Where were brokers on fairness then? Hmm, it’s hush hush when you’re reaping the benefit, an outrage when you’re not…

    No, I don’t work for a bank and never have. I’m a compliance consultant who sees both sides for what they are, biased. If you want a rant, keep going, the only people listening are people you’ve no need to convince. If you want to be taken seriously, try a little objectivity.

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