The FCA has scrapped a full review of the way it calculates firms’ regulatory fees after deciding to continue with its current methodology following industry talks.
In April 2013, the regulator set out plans to explore alternative methods for allocating regulatory fees, including charging fees based on income or risk.
It was set to issue a discussion paper on the subject last autumn, but in November said that following industry talks this had been delayed until Q1 2014.
However, the FCA says it has now decided to stick with its current approach and will not issue a discussion paper on the subject. This follows industry discussions which considered the alternatives of income-based and risk-based fees.
The regulator says this is because its current methodology “makes a stronger link between where we allocate our resources and the fees charged than either of the alternative approaches would”, and because it can operate its current approach “efficiently”.
Apfa director general Chris Hannant says the FCA “has given up too easily”.
The trade body has been calling for regulatory fees to be based on income, arguing this would make adviser costs more predictable.
Hannant says: “We still believe this would be do-able, and are disappointed that the FCA is not continuing with its review.
“Advisers are still paying a disproportionately large share of the regulator’s costs given they represent a very low risk of consumer detriment. The changes that are happening in the pensions and long-term care market mean it has never been more important that consumers have access to affordable advice, so we urge the FCA to restart its review.”
A spokesman for the FCA says: “We have worked hard to ensure that small firms we regulate pay the least and increases are mainly borne by larger and more complex groups.
“We said in the Journey to the FCA that we would explore the possible alternatives for how we raise our fees. During the latter half of 2013 we engaged with stakeholders, including trade bodies, as part of the review. These stakeholders did not propose any fundamental alternatives at the outset of the review so we sought views, in principle, on two possible approaches – a revenue approach and a firms’ categories approach.
“The discussions with stakeholders yielded no broad consensus for such a degree of departure from our current approach so we have decided to stick to the current model.”
The FCA calculates fees by splitting firms into 14 different fee blocks based on their regulatory permissions, and according to the size of regulatory activity they undertake.