View more on these topics

FCA chief Martin Wheatley warns of higher regulatory costs

Martin Wheatley 480
FCA chief executive designate Martin Wheatley

Financial Conduct Authority chief executive designate Martin Wheatley has admitted the regulator’s expanding remit will inevitably lead to higher industry costs.

Speaking at a briefing on the FCA in Canary Wharf today, Wheatley said the FCA is taking on more responsibilities such as the supervision of the consumer credit market and a new competition objective but none of the FSA’s existing remit is being taken away.

He said: “Frankly nothing that has been written into the law, or that is being asked of us, is to stop doing anything. The requests being made of us are, can you operate in this space, can you take on competition, can you take on consumer credit, will you be more intrusive.

“Clearly that comes at a cost. I have worked very hard to try and minimise the additional costs to the industry both this year and going forward. We have got a set of practitioner panels that we have talked to about our cost structure and we explain to them what the drivers of our costs are, where we can control them, and where there will be additional costs.”

Asked by Money Marketing what reassurances he could give firms about spiralling regulatory costs, Wheatley said: “The only commitment I can give is I will try as far as I can to maximise the productivity of this organisation and avoid ballooning costs, but the simple fact is with more responsibilities and not being asked to drop anything, there is going to be more cost.”

The FSA will publish the FCA business plan for 2013/14 next week which will set out the new regulator’s priorities and its budget. The total budget for the FSA for 2012/13 was £578.4m, up 15.6 per cent from £500.5m in 2011/12.

Figures compiled by Money Marketing from FSA data suggest the one-off RDR cost to firms could hit £1.5bn with total costs reaching up to £2.6bn after five years.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 35 comments at the moment, we would love to hear your opinion too.

  1. Ha Ha!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  2. Scott Taylor-Barr 22nd March 2013 at 11:57 am

    OK, is it just me, or have I misunderstood something here?

    I thought that the FSA’s responsibilities were being split between the FCA (consumer/retail) and the Bank Of England (Macro Economic issues).

    In which case the FCA will have a narrower remit than the outgoing FSA as some burden will have been passed to the BoE?

  3. Is it my imagination or are we paying a disproportionate amount to regulate an industry in which the level of crime is also increasing in line with regulation. Isn`t it time someone, god knows who, asked the question ” why has regulation not worked?”

  4. And they wonder why hundreds if not thousands of IFAs are leaving this industry.

    These people are out of control.

    If they had to run a business that depended on their customers goodwill in using their services it would soon become apparent that their ability to function and provide a decent service to stakeholders would be impaired to the point of insolvency because no one would want to pay for their services.

    Not fit for purpose doesn’t even cover it.

    What are they going to do when the IFA sector shrinks to an irrelevant level?

    Who is going to pay their increased costs for an inadequate punitive and totally unaccountable service?

  5. What does he take us for?

    A recent survey found that 10-15% of wealth manager’s income is eaten up by regulatory costs. So it is time that our parasitic regulators cut their cloth and worked within a fixed budget.

    I have no problem with regulation – however, it has to be measured and empire building contained. It is time to rein in the purchase of nice offices, expensive paintings for the walls and unfettered bonuses.

    They are there due to our existence, and they should not forget that.

  6. If we accept regulatory costs have to rise, how do we explain the benefits of this to consumers and how do we ensure regulatory fees are applied proportionately to the relevant parts of the sector? I certainly don’t want to pay for supervising the consumer credit market, particularly as we have already this week had to pay for the failure of a stockbroker and spread betting firm!

  7. We have just seen statistics showing a considerable reduction in IFAs. There are therefore less advisers to regulate and therefore their share of the overall regulatory costs should reduce. I assume the extra costs for the new activities will be borne by those who arte directly invollved in the new activities. Seem fair to me, so it will not happen.

  8. I suppose the cost goes down when everybody has been priced out of business and there is nobody left to regulate.

  9. More trouts in the trough.

    One way of the Treasury balancing the books – transfer the costs of things to the private sector but claim responsibility for any success while denying any responsibility when it goes wrong.

  10. There is an inherent assumption in Mr Wheatley’s statement that the way the work is done will remain the same.

    Costs could be saved by working smarter. Simplifying the rules and supervision to focus on what’s important would result in better regulation and lower costs.

    At present everything is so complicated that the crooks, the negligent and the self-serving can hide in plain sight (e.g. bank advisers and their sales culture ‘discovered’ after 15-20 years).

    A dash of common sense and a practical approach would benefit everyone.

  11. @ Anon 12:08

    Presumably, you meant more “snouts” in the trough, or are you referring to our regulators penchant for fine dining at our expense?

  12. No surprise at that. More or less than 10%?
    PI costs?, FOS costs, FSCS costs? SPS costs? Proff bodies ?
    2.6 BILLION is never enough even for these guys.
    Factor in the reduction in Banks, Insurance companies and IFA’s reducing adviser numbers the percentage increase for the remainder has to increase and well above inflation.
    I wonder how long the FCA will last, the average term of our regulators in 7 years before they have been deemed to fail and then the next always needs more money to put things right and regulate a little more.

  13. When will someone take these idiots to task and make them accountable for their actions. The FCA will have less responsibilities as previously mentioned as the Banks will be regulated elsewhere – I suppose the cost increase is so they can continue with their level of salary & bonuses.

  14. I presume all the areas that the FCA will have to regulate in their expanded remit will have to pay towards this bill. As they are going to regulate consumer credit and competition, maybe they will be able to get money from the share levy, and charge consumer lenders a huge fee.
    After all, the damage done by a failure to tick some boxes when providing investment advice is hardly going to cause a huge detriment to the nations wealth, wheras investing in green energy,land banks or carrabean property does.But it has been the tick box that matters most.
    But the damage to the nations wealth done by certain lenders, particularly those who operate in the riskier, lower end of the business, payday lenders and sub prime second mortgages etc, is huge.
    When the FCA defines what ‘responsable lending’ is, the FCA is going to be overwelmed with claims and rows, together with political considerations. Let the lenders pay until the pips squeak.

  15. As RDR showed we are an easy target with no backbone, no union and no voice. We rolled over and allowed RDR to happen without anymore than a whimper. Aifa, as was, did nothing, Gill Cardy’s Mob again nothing. An E petition was put up and needed 100000 signitures, I came on these pages asking every IFA to sign and to get 3 or 4 of their best clients to sign. Had that happened the 100000 target would hav been acheived and RDR would have been properly debated in Parliament. I looked in October and less than 1000 signitures had been added!!! No Other profession or indusrty would stand for the way we are treated and until we learn to fight back and say NO we will continue to be fleeced by our regulator. If we also stopped work and stopped paying our fees they would soon want to compromise!
    Mr Wheatley, baring in mind that you earn 3 times that of the prime minister, funded by us and you stated “I have worked very hard to try and minimise the additional costs to the industry both this year and going forward ” how about helping out with a pay cut for yourself for starters??
    Watch this space-Not

  16. Rev Norfolk N Chance 22nd March 2013 at 1:14 pm

    Here’s an interesting analogy with UK (plc) politicians:

    (a) Both run by incompetents, who haven’ t a clue
    (b) The hierarchy ‘look after their own’ – no questions asked
    (c) The hierarchy enjoy generous pension/income benefits, which cannot (really) be affected
    (d) If the hierarchy fail, they simply head into the industries that they look/ed after
    (e) Any failings are simply shrugged off under the excuse of ‘a difficult job to do’ – indeed, these days are less likely to ‘fall on their sword’ for their errors
    (f) Almost ‘tyrannical rule’ … mmmm (tic)
    (g) Those, for whom they are responsible, are disaffected, priced out of the market (regulatory costs/taxation) and have no-one to turn to (or ‘voice’), to do anything about it.
    (h) Neither listen (unless it suits them)
    (i) Both like to swell their underlying ranks (FSA staff/Civil servants, esp Labour Party) to justify their existence
    (j) Both ‘enjoy’ lavish expenditure which cannot really be justified
    (k) Eventually their mistakes/incompetence/excessive and unjustified costs will ‘kill off the golden goose’
    (l) Both overdue a serious ‘down-grade’!!

    Hey ho …

  17. Richard Wright – the only way anyone will listen is if we squeeze one of the really big providers hard by not giving Scottish Widows or Aviva any business for a month as well as starting the surrender process for existing business. That would scare the the bejeezus out of somebody at the top.

    Rememeber they did this in the USA with petrol where consumers stopped buying from a particular retailer on a rotating weekly basis. Problem sovleved within 3 weeks!!

  18. RegulatorSaurusRex 22nd March 2013 at 1:29 pm

    We regulators always have a good chuckle at the comments on sites like this.

    Guffaw, guffaw, the regulated do bleat somewhat!!

  19. Ultimately the consumer wants greater protection then this will ultimately cost more money and therefore adviser fees will have to go up.

    Instead of bleating about the regulator maybe we should come up with ideas on how to reduce the costs of regulation. A good example of this would be for IFA’s to take some responsibility for what happens in our industry and to report what they perceive to be breaches of rules.

    I wonder how many IFA’s are out there who are willing to take leads off websites where there is no individual who is authorised and regulated, or to invest client money in exotic investment schemes where there are high levels of commission (thank god that is now impossible). The fact is we only have ourselves to blame for the high cost of regulation as I wonder how many IFA’s out there actually report anything to the authorities when they see wrongdoing.

    The second part of this deal would be for the regulator to take serious reports from IFA’s instead of giving is what effectively lipservice most of the time.

  20. Well the money has to come from somewhere, what with fewer, advisers, Osbourne raiding the fine kitty, stupid panels and hangers on, high salaries and perks, FOS, MAS, FSCS etc etc etc
    Nothing will change as long as they are allowed to set their own budgets.
    And dont even get me started on having to make up the shortfall in their pension pot !!!!
    Vile money grabing toads the whole lot of them

  21. Is regulation part of the problem rather than the solution?

    Regulation has without doubt failed to prevent systemic abuse of consumers in areas where regulated firms have sought refuge from regulation by concentrating on selling unregulated products such as ASU, UCIS, insurance and swaps among other things that were under the radar while the regulators were looking elsewhere.

    If regulators followed the money and spotted trends they wouldn’t be wasting £millions on after the event regulation. Point, fine, ban clearly doesn’t work does it Martin?

  22. RegulatorSaurusRex (above) is on the money … literally.

    Never was a truer word spken when dear Patience (Wheatcroft) said all those years ago ‘we should all demand Government [and quasi-Government] jobs’.

    RegulatorSaurusRex can stay smugly in his ‘job’ whilst the IFA’s struggle to feed his maw.

    O what a happy S.Rex he is.

  23. Rather unfortunate picture of Wheatley.
    Cooper -Wheatley- Wheatley -Cooper, jus’ like that, ehheh.
    Maybe this guy’s in on some sick joke which we’re not privy to.

    It’s no joke, pal; not from where I’m standing.

  24. If the responsibilities of the FCA over those of the FSA are to reduce why are the costs set to rise?

    Surely if this was the case in my own business I’d be looking hard to find out why.

    One way to cut the costs of regulation is to get rid of the ’20/20 hindsight regulator, use half of the annual fees to create a redress fund and simply have the FOS.

  25. Neil F Liversidge 22nd March 2013 at 2:40 pm

    Higher regulatory costs eh? Well there’s a ******* big surprise!

  26. Becoming a headcase IFA 22nd March 2013 at 2:45 pm

    Richard Wright is correct and JF also but AIFA, I feel, ruined the reputation of IFA union type bodies and it is now hard to retrieve. Such a shame because that is what is needed.

  27. RegulatorSaurus Rex….
    Ho hum.
    IF this troll is a genuine regulator’s aparachik, then the tag reflects the organisation which he/she/it purports to work.:

    Unpleasant, particularly small brained.and lacking in any real productive purpose.

  28. Simple Truth | 22 Mar 2013 1:47 pm

    You obviously don’t read all the posts regarding Harlequin, Bad Advice from Banks and large Networks etc.

    IFAs do report things to the FSA – they just choose to ignore them

  29. Richard – DId you not read the article? The regulators responsibilities are to increase, thats why it will cost more to run. That would be the case in every business. Its the industry that has caused this, if there were less crooks operating in this market the regulation would be much lighter.

  30. This is utter folly and the irony seems lost on the regulator that this will lead to fewer advisers and fewer members of the public receiving good advice. This is not news to advisers.

    As the main “villains of the piece” (by complaint numbers) is the bank adviser community, who now scarcely exist, what precisely is costing so much? Almost everything is online, sales, revenues, complaints and queries can presumably challenge data supplied in a methodical fashion? I am completely dumbfounded at the assumption that more is better. Focus is better. Effective and efficient is better.

    Oh well, I have had my share of the £xm FSCS levy today… for under-estimating the actual cost and failing to spot firms malpracticing…

  31. What a great idea; why not put the regulatory costs so high that the public mistrust financial services so much that they don’t insure their lives at all, don’t plan for their futures, don’t insure their houses and cars and then the FSA twirps can all be made redundant along with the rest of us? Oh I didn’t notice; it’s already happening (except for the FSA twirps redundancy package – so far…

  32. Over regulated over priced under delivered
    Even the banks have quit

  33. Am i the only one that finds it amazing that new entrants to financial advice pay for the past deeds of advisers (be they bank, tied or independent).

    Anyone would be mad to start up a business where you don’t know what your running costs are going to be due to new ‘mis-selling’ scandals that had absolutely nothing to do with you resulting in out of the blue levies.

  34. The question that springs to my mind is Will these extra costs be fairly apportioned, as in levied against those areas of the industry that actually warrant a greater degree of regulatory attention whilst allowing some relief to those that don’t?

    By Statute (which the FSA to date has routinely ignored), regulation is supposed to be “risk-based, proportionate and targeted”…………”whilst delivering significant benefits to low risk and compliant businesses through better-focused inspection activity, increased use of advice for businesses, and lower compliance costs”.

    Will you be taking these considerations on board, Mr Wheatley, and framing regulatory policy accordingly?

  35. Wheately said “The requests being made of us are, can you operate in this space, can you take on competition, can you take on consumer credit, will you be more intrusive”
    The government want the regulator to do everything the government should be doing via taxes. They want us to pay for it.
    We are a sitting target. No voice, no representation. no one gives a toss about us. Ask Mark Garnier. Pay up or shut up.
    Vote UKIP Nigel Farage is the only one willing to take on this out of control quango.

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com