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FCA defends 10% hike in adviser fees

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The FCA has defended its decision to increase advisers’ regulatory fees by 10 per cent.

In a policy statement on 2015/16 fees and levies published today, the FCA confirmed that firms in the A13 block will pay £74.9m in 2015/16, up from £68m in 2014/15.

The A13 fee block relates to advisers who do not hold client money.

The regulator also confirmed its minimum fee will increase from £1,000 to £1,084, the first rise since 2010.

The FCA set out its fee proposals in a consultation paper in March.

It says it received responses from an adviser trade body, a network and 25 advice firms arguing against the increase in fees.

Respondents argued that the cost of advice has risen and access to advice is a challenge for many consumers, while the setting of fees should take into account other regulatory costs such as professional indemnity insurance and fees for other regulatory bodies.

The FCA says: “We acknowledge that our fees are a cost to financial advisers and that cost may be passed on to consumers of their services. However, we believe that the funding those fees provide enable us to meet our objectives, including protecting consumers, resulting in a benefit for consumers.

“Our fees are set to recover the funding of the resources we need to achieve our statutory objectives as set out in our business plans each year.

“To that extent they cannot be reduced to take account of the fees and levies that firms pay to other organisations. If they did then we would not be raising the funding we believe we need to meet our statutory objectives.”

The regulator says all 70 respondents to the consultation paper raised concerns over the 8 per cent increase in its annual funding requirement, from £446.4m in 2014/15 to £481.6m in 2015/16. The FCA says the rise is down to higher staff and technology costs.

But respondents argued the increase is far in excess of inflation and stands in “stark contrast” to the pressure to reduce costs in both public and private sectors.

The FCA argues the increase is necessary to meet its objectives.

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Comments

There are 25 comments at the moment, we would love to hear your opinion too.

  1. Which objectives? unimpressed.

  2. anthony walters 23rd June 2015 at 12:28 pm

    Why do the FCA offer the facility of a ‘consultation paper’ requesting informed responses when they plainly have made up their mind in advance. Seems along with so much in the Regulatory world to be just a box ticking exercise in self justification. Perhaps somebody would be able to confirm exactly what % salary increases have been provided to employees of FCA, not just the term higher staff

  3. I suppose if Sainsbury’s upped the cost of Beans by 10% I’d go somewhere else, or do I just increase our fees by 10% to compensate?

  4. Seems a shame that if £818m has been paid in fines in 2015, none of that can find its way to cover this?

  5. Agree – woolly objectives.

    An old boss of mine once said, if the FSA (as was) simply checked files they would soon work out within a few hours who was pretty much doing the job right and who wasn’t. He’s probably right. You can check a lot of files with £74.9m

  6. just forcing us independents out of business by the back door slowly but surely. the fca do not have a clue on how to run a tight ship. wonder what they will all do when all the ifas are out of business and there are no one left to pay for there over inflated office costs and wonderful salaries. I might jump ship and join them on the gravy train whilst its still going. make the criminals pay not the compliant advisers who are still providing a good service to their clients

  7. No surprises……a complete farce…….

  8. Andrew Pritchard 23rd June 2015 at 1:00 pm

    We need a regulator to regulate the regulator.

  9. Their objectives are as below.

    1. Retain their position as ungoverned predators on the industry
    2. Pay bonuses sufficient to catch up on last years missed bonuses
    3. Continue the issuing of consultations which result in respondents being ignored
    4. Keep meeting with. laughing at and ignoring APFA

  10. Naturally. They have to pay all those inflated salaries and award well above inflation increases. Someone has to pay.

    “…that cost may be passed on to consumers ” Not may, WILL. Now this is where logic breaks down. If one of their prime objectives is to protect consumers and these consumers either have to meet increased adviser fees – or forgo advice altogether, then doesn’t it seem logical that the Regulator should bill the clients directly. Wouldn’t that be more honest if not to say logical? As has been mooted so often in the past – perhaps a product levy?

    Indeed I have seen stockbroker contract notes which add a £10 or £20 extra labelled ‘compliance charge’. Perhaps adviser bills should do the same.

  11. They cannot be justified, the Regulator has always been an inept body since creation, failing to meet any objective that could be seen as any use to a Client. It pays ridiculous salaries and is located in one of the most expensive areas in the country, this position also cannot be justified.
    If I remember correctly it was its membership that paid for the premises they currently reside in, can anyone tell me how its resulting sale to the Chinese, with the subsequent proceeds disappearing into a black hole, can be justified ? Or indeed the subsequent lease and associated payments that go hand in hand ? The Financial Conduct Authority, absolutely laughable, there has been no appropriate Financial Conduct carried out by the Regulator since its creation. The £500 million PA it currently leaches from the Industry would be better off invested in a ring fenced fund for those who truly need it, we might even find a surplus at the end of year, unlike the current regime which simply increases each year. The most inept body ever created for Consumer protection………….

  12. Julian Stevens 23rd June 2015 at 1:20 pm

    Andrew Pritchard ~ exactly what I’ve been clamouring for for the past, um, at least five years, but APFA doesn’t seem to have the bottle for such a challenge and the TSC seems quite content to be treated by the FCA like a bunch of flaccid pricks. Maybe Libertatem will step up to the plate.

  13. IFAs represent 2 successful FOS claims or every 1000 claims it receives. Why are IFAs paying 16% of FCA’s bill? Does not represent the risk we present. Advisers should seriously consider publishing a breakdown of the costs not just regulatory but compensation and side costs too

    • Garry I don’t think its about risk ! its more to do with revenue RMAR’s are totally geared up, to exploit our wealth to the advantage of the FCA, we are being farmed not regulated !!

  14. Martin Bamford 23rd June 2015 at 1:44 pm

    I’m quite comfortable paying 10% more in FCA fees this year, as long as our FSCS levy is (at least) 10% lower next year. A reasonable enough outcome for spending more on regulation?

  15. james mccormick 23rd June 2015 at 2:10 pm

    worth considering that if our fellow practioners who placed clients in unsuitable SIPP & UCIS products, would the FSCS have had to increase levies???? Look in before we look out..

  16. A couple of thoughts:

    In the context of total regulatory fee increases over the last 4-5 years, and the (presumably smaller) number of advisers there now are – the increases in fees per adviser are probably even higher than headline figures might suggest.

    On the other hand, have the turnover and profits of IFA businesses increased in recent years such that these costs are now proportionately less than they have been previously?

    As Mr Heath says, the costs of regulation should more accurately reflect the risks to the users of the regulated service. 0.2% v 16% doesn’t add up, but having said that, you would presumably need to look at the number of complaints per product sold, combined with the financial damage in monetary terms i.e. the financial loss of the client per claim, rather than just the number of complaints.

    We’ll probably never know the answer to these questions in order that an accurate picture can be seen, so it begs the question, why don’t the professional bodies and trade bodies gather this kind of longer term data? In the absence of such information, how can the FCA be encouraged to alter this seemingly upward only spiral?

  17. Julian Stevens 23rd June 2015 at 2:35 pm

    “The FCA argues the increase is necessary to meet its objectives.” And that’s a defence? Given the long list of examples of the FCA having failed conspicuously to meet its objectives, this is even more insulting. And did any of the responses to its “consultation” that it received make the slightest scrap of difference to what it had already decided it was going to do? I suspect not. It may have “taken them on board”, as Sheila Nicholl used to like to say, but none of them actually resulted in anything being changed, did they? Yet the FCA says: We consulted, so that makes everything okay. The FCA’s consultations are just hollow, token shams.

  18. the fees must reflect the risk borne by the adviser/product provider/bank. a colleague of mine who is a mortgage broker-he does no other business than that of mortgage and life insurance had to pay an increased levy for “pensions advice” which he does not offer and never has done. how is this fair? but then FCA does not stand for Fair Conduct Authority…does it?! Dick Turpin had the decency to at least wear a mask when he robbed people…

  19. I was going to pen a long winded rant but decided that its just not worth it.
    You cannot reason with an organisation that has average salaries of £92000 pa and is answerable to no-one. Cuts to Government bodies? what cuts?
    It is also a fact that if I were banned/barred from practicing by the FCA that I have no leave to appeal, if I committed murder I would be able to appeal. Consultation documents my arse, they should be renamed as Confirmation documents.

  20. One day politicians will say we charge too much for our services, maybe then the truth will be revealed. By then the FCA will all have knighthoods and be untouchable.

  21. I have to be honest, I don’t know why the FCA is defending anything ! its not as if we can do anything about it is there !

    We are held in such poor light (designed to be kept like this) by the regulator, government, press, and non-clients that this is unlikely to alter !

    Financial slaves we are, and we will stay ! good or bad it makes no difference we are bonded not by colour but by association of what we do, same ole “ism” delivered in the newest of ways !
    Personally I would just like my human rights back please !

  22. There is no ‘defence’ against these extortionate rises. There are less firms, less advisers and very few banks giving face to face financial advice so what are these objectives which have seen increases in FCA fees and levies of over 26% in the last two years?

    “Our fees are set to recover the funding of the resources we need to achieve our statutory objectives as set out in our business plans each year.

    This statement is a slap in the face for every IFA who has seen their regulatory costs spiral to fund an organisation that has no intention of ever trying to keep its own costs under control and makes statements acknowledging these costs will have to be passed on to the consumer. (Treating customers fairly, remember that?) When they’ve driven us out of business will this be ‘objective’ achieved?

  23. Defence?

    That wasn’t much of a defence. The FCA basically said: “We turned on the tap because we needed more money. We’re in charge so we can do that.”

    As others have said, they can not keep increasing the levies without risking the loss of all those who pay the levies. The primary purpose of the FCA is the protection of consumers. How can they protect consumers if they continue to make receiving advice unaffordable for most?

  24. Like the others who have posted I feel that the increase is a further demonstration of the attitude of the regulator in general. Having said that I would also add that unlike an IFA who might get it wrong no one at the regulator in any of its various incarnations has ever carried the can for their mistakes- Key Data and Arch Cru being just two examples- and still continue to enjoy salaries that are beyond the dreams of most folk

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