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FCA overcharges advice fee block £118m over five years

Fee block ‘anomoly’ means A13 advisers have been overpaying by tens of millions of pounds.

The FCA fee block containing most advisers has been overcharged by £118m over the past five years, Money Marketing can reveal.

The FCA said last month there is an “anomaly” in the way the A13 block – which relates to advisers who do not hold client money – interacts with A12, a separate fee block for advisers, dealers and brokers who hold client money. It means A13 advisers have been paying a higher fee per £1,000 of income than firms which hold client money despite requiring less regulatory scrutiny.

The regulator has proposed merging the A12 and A13 fee blocks for 2014/15, resulting in firms paying £2.84 per £1,000 of income, compared to £6.89 for A13 firms. Firms which hold client money would pay an additional fee.

Money Marketing calculates this would see A13 advisers paying a total of around £16.5m a year compared with £39.2m for 2013/14, meaning they are overpaying by £22.7m this year or by £3,354 per firm in the fee block.

Prior to 2013/14, advisers’ fees were calculated based on the number of approved persons rather than income. The FCA admits the anomaly has existed for some time.

In 2012/13, A13 advisers paid £1,191.47 per approved person. A12 firms paid £591.58 per approved person. Between 2009/10 and 2012/13, A13 advisers paid a total of £161.2m in fees. Under the new system, they would have paid £66m over the four-year period instead.

Over the past five years, advisers have been overcharged by some £117.9m.

Jacksons Wealth Management managing director Pete Matthew says: “This is a fundamental cock-up. Any idiot knows a firm which holds client money poses a greater regulatory risk than one which does not, so it is a travesty this has happened. If I overcharged a client, I would repay.”

Apfa director general Chris Hannant says the FCA ought to rebate advisers and needs to urgently correct the model.

An FCA spokeswoman says: “Many IFAs pay the minimum £1,000. The FCA is revising its policy but the new approach to fees is still under consultation.”

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. E L Wisty (an only twin) 14th November 2013 at 9:26 am

    A simple solution – use the overcharged funds to meet the cost of the CF Arch cru consumer review.

    This way, the FCA can ensure that the adviser community pays for their and Capita’s failings, clients will get all their money back and the FCA won’t have to rebate money to those pesky IFAs!

    Alternatively, they should instruct a firm to carry out a s.166 skilled person report into this cock up, and then fine themselves handsomely.

  2. Doesn’t this type of cock up make your blood boil. Maybe that’s why the great Hector has resigned from Barclays….it’s not due to stress, but so he can come back to the FCA and clean up this mess that was made under his watch!!

    I’m not holding my breath for any kind of refund!! Only a public sector organisation can screw up, and get away with it.

  3. Now what would the FCA have to say about an adviser that had been overcharging their client for the last 5 years?

    I suppose they’ll find a use for that extra money. There’s bound to be a bonus pool that needs topping up as well as some golden goodbyes to negotiate and of course the gold plated pension scheme to bolster.

    They really couldn’t start a fire in a match factory could they?

  4. Regulation means never having to say you are sorry (or give any money back).

    After all, it wasn’t the FSA that did this. It was the completely and totally different and utterly unconnected FSA. Look, see; even their names are different.

  5. That’s about £4k each. Plus interest!

    Should I book the holiday now?

  6. Ironic that this comes out the day the FCA are warning providers about overcharging!

  7. E L Wisty (an only twin) 14th November 2013 at 11:15 am

    Come on MM, don’t allow an un-named FCA apparatchik to fob you off with a meaningless response. Ask the responsible individual, on the record, to confirm whether:

    1. They intend to rebate the excess payments back to affected firms, and by when?

    2. They intend to take action against those responsible – just as they have done against banks who have overcharged (and even undercharged) customers.

    They cannot be allowed to soft-soap their way out of this cock-up.

    If they continue in this vein, then it is time that the press refused them any coverage until they start answering questions such as the ones above, and in respect of their dreadful treatment of CF Arch cru investors.

  8. Don’t forget the poor sods forced out of business pre 2013 !!!

    These people paid their dues as well, I hope this is all paid back with interest !!!!

    Let us not forget either that we all pay the bills for the failed FSA and future failures of the now FCA so this money should be reclaimed from the bonuses of Sants, Cole, Nichol, Smith, Wheatley, Percival, McDermott, Woodall etc etc etc etc they will just keep making the same mistakes

    118 million that will make their eyes water !!!!

  9. Anyone can make mistakes I suppose. Did call them last year to double check fees, as it seemed a little high. Was told it was correct. Expect an adjustment, or refund naturally. This represents a large proportion of the profits of smaller firms, who form the bulk of advisers.
    The fee block system and GABRIEL are far too complex for a simple job, and will cause many more issues in the future.
    Anthony Badaloo is Financial Adviser @ Church Hill Finance http://www.church-hill.net

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