Aifa and the Institute of Financial Planning have raised concerns with MPs over the overall burden of regulatory costs on small firms.
At a joint committee hearing on the draft Financial Services Bill last week, Aifa director general Stephen Gay said constant regulatory change places a heavy burden on small businesses and change such as the RDR can even threaten small firms’ existence.
He said: “We are concerned about the overall burden of cost on small firms and the layers of costs for the different regulatory entities, whether it is the Financial Conduct Authority, the Financial Ombudsman Service, the Financial Services Compensation Scheme or the Money Advice Service. We are also concerned about whether the aggregate cost burden is being looked at and whether it reduces access to services and creates detriment to the consumer.”
Gay added the FCA should be required to quantify the extent to which incremental rises in the cost of regulation are damaging consumer access to advice.
Institute of Financial Planning chief executive Nick Cann said: “We would share the view on the subject of costs being an issue, particularly as we have seen no sign of how any regulatory dividend would be put in place.”
Professional bodies have long been pushing the concept of a regulatory dividend, such as lower regulatory fees or fewer supervisory visits, for firms that have qualified beyond the minimum QCF level four and have demonstrated improvements to their business model.
Cann was also concerned that the draft bill does not address the issue of consumers engaging with their finances.
He said: “There is talk about competition and protection but it seems consumer engagement has been missed. We see this as a big issue, particularly in terms of the outcome of the current regulatory regime.”