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FCA to consult on minimum fees after ‘subsidy’ concerns

The FCA is to consult on changes to the way it calculates minimum annual fees after concerns were raised that larger firms are subsidising small businesses.

In its final fees and levies paper for 2014/15, published today, the regulator confirms it is keeping minimum fees unchanged at £1,000 for the fifth year running.

But the FCA says it will consult in October on a range of alternatives for calculating the minimum fees.

It says there was a “mixed response” to the proposal to keep minimum fees unchanged, with four respondents in favour and four against.

An FCA spokesman says: “Some respondents expressed concern that larger firms are subsidising small firms because the fees have remained unchanged for five years.”

The FCA consulted on 2014/15 regulatory fees in March. The regulator proposed charging A13 advisers £68m, down 19 per cent from £83.6m in 2013/14.

Today’s paper confirms the proposals, which include the merger of the A12 and A13 fee blocks.

The A13 fee block relates to advisers who do not hold client money, while A12 relates to advisers, dealers and brokers who hold client money.

The FCA says some respondents raised concerns that advisers continue to pay too much, because the A13 fees for 2014/15 account for 15 per cent of the FCA’s total annual fees.

But the FCA says: “Although we allocate 15 per cent (£68m) of our annual funding requirement to the A13 fee-block it is not only recovered from financial advisers. We estimate that the amount recovered from financial advisers to be £6m (8.5 per cent) and the number of financial advisers to be 55 per cent of the total firms that pay fees in A13.”

The regulator says there was also criticism of the impact of consumer credit fees on mortgage and investment intermediaries who argue they have to pay fees even if they earn no direct income from consumer credit.

Apfa has previously said that further clarity is needed on when advisers need a consumer credit licence.

But the FCA says: “Our fees for mortgage and investment intermediaries follow firms’ permissions and individual firms must judge whether they need consumer credit permissions to do business.”


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. One question what about the 118 million that was over charged fee block A13 ?

  2. Phil Billingham 3rd July 2014 at 4:56 pm

    Probably the reverse. This how much more risk large firms have posed, partially because of the separation of ownership and management. Small firms carry the can personally, and usually give better advice.

    Special pleading and lobbying going on?

  3. Large clients cross subsidising small ones, sounds familiar

  4. Julian Stevens 3rd July 2014 at 9:55 pm

    Three substantial elements of the problem are:-

    1. the total cost of the FCA (cut that and everyone would see less money being leeched from their turnover),

    2. its disproportionate focus on small intermediaries (who, as a group, pose nothing like the risks of much larger enterprises) and

    3. its quite unreasonable insistence on treating networks as if they’re large firms (whereas what they really are are collectives of mostly very small firms that the FCA regulates by proxy, thereby reducing its overhead significantly).

    Unfortunately, neither logic or fairness seem to form part of the FCA’s thinking.

  5. Unfortunately, some of my colleagues are missing the point, small IFA firms are harder to regulate and the FSA and now the FCA ( the same unregulated out of control regulator) do not want small IFA’s, simple, their aim is to price us out.

  6. I have to disagree Mr Tired

    We are easy to manage the FCA make it hard !! as Phil states we represent much less risk than large firms, we also have to pay for their much larger mistakes ! and lets face it us small IFAs are much quicker to adapt to the changes ! and lets face it we do look after our clients a lot better (IMHO) so our complaint stats are hardly recordable ?

    If I look at the reporting for the FCA I have to do as a small one man band, 2 RMAR,s a year 1 online regulatory risk questionnaire a year, full blown audit at least once every 3/4 years !! I ask; is it all really necessary ? not to mention the personal man hours to do all this, not just from me but the FCA (if they bother to look at all this stuff)

    I would argue the min fee we have to pay is still to much by half !!!

    I don’t think the FCA are trying to price us out, they (FCA) try to sheep pen everyone (AKA fee blocks) out of pure ease !! we take the brunt of their incompetence (118 million mistakes for instance)

  7. Another thing that has a bearing on all this, just released today an FOI request has identified that they (FCA) have spent over £3 million in legal fees in the first 9 mths in office !!

    Couple that with; the legal fees for Adamsons mess up with the “closed book” debacle may cost upto £10 million !!!

    And Mr Wheatley has told us they will be delaying their bonuses !!! delay ! delay ? I don’t think they will be deserving a bonus for the next 10 years !!!

    And as far as I am aware Mr Osbourne still collects all the fines ?

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