View more on these topics

Apfa argues for fees overhaul based on income

David-Ferguson-Nucleus-2013-700x450.jpg
Apfa director general Chris Hannant

Apfa has called for the FCA’s fee blocks to be scrapped in favour of  fees based solely on income, arguing that it would make adviser costs more predictable.

The FCA announced in April that it was carrying out a review into the way firms’ regulatory fees are calculated, which could lead to the current fee block model being scrapped.

Options under consideration include: not segmenting the industry and charging fees based on income; segmenting firms via fee blocks or risk categories; and charging fees retrospectively.

While advisers are currently charged fees based on income rather than headcount, as was previously the case, this is still within the fee block structure.

In a letter to the FCA, Apfa director general Chris Hannant says: “Our view is a common measure approach, based on income, is preferable to the current fee blocks. It has the merit of simplicity and relative predictability, and effectively uses size as a proxy for risk.

“Given that the current method results in a flawed outcome, we do not see any merit in persevering with it.”

Apfa says another option could be for the FCA to consider merging some of the existing fee blocks, such as those covering financial advisers, mortgage brokers and general insurance brokers.

The trade body says the minimum fee block, where firms earning less than £100,000 pay £1,000, should be kept.

Advisers in the A13 fee block are paying a total of £38.1m in regulatory fees this year, up 16 per cent from £32.8m in 2012/13.

Plan Money director Peter Chadborn says: “Income is too simplistic a measure. It would be better if regulatory fees were based on business risk, with higher fees for firms involved in more esoteric investments and where there is greater potential for consumer detriment.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. The sentiments are worthy but, as usual, APFA is highly unlikely to publish the FSA’s response to its letter, assuming of course that the FSA even deigns to respond. The FSA might say they’ll think about it but we can be pretty certain that’s the last that APFA or anyone else will ever hear about it.

    You need to up your game by a factor of 10 APFA. Pissing about writing letters is getting us nowhere.

Leave a comment