Against this backdrop, the huge rise in regulatory fees are particularly galling. Mid to large-sized IFAs and networks are set to face the full force of these increases, with rises of up to 90 per cent, and all investment firms will have to deal with the big increase in FSCS fees to pay for failed stockbrokers.
Aifa believes the fee increases pose a “grave threat” to many advisers and their clients and has set up a group to challenge the proposals. Money Marketing urges members to support the initiative to ensure that the cause is heard loud and clear.
It is evident that the recession is going to be deeper than previously thought even a few months ago. In this context, a number of important issues surrounding the retail distribution review may need to be revisited. First, the timescale of the review must again be scrutinised and the possibility of delaying many, if not all, the proposals by a year needs to be looked at.
With many firms struggling and the probability that economic woes could last well into next year, serious thought must be given by the regulator to a delay to ensure as many advisers can reach the new rules on qualifications and adviser charging as possible.
Another area that should be looked at again is the issue of factoring with regard to adviser charging. Industry voices have expressed concern that banning factoring, whereby providers can pay an up-front sum to advisers that is deducted from the product over time, could severely damage adviser revenues and limit consumer access to regular-premium savings products.
The FSA is worried that allowing factoring could lead to some provider bias being retained in the system through providers offering different factoring deals but standardising these arrangements would guard against this.
The FSA is understood to have concerns that standardised factoring could fall foul of competition rules and would need to be cleared by the Office of Fair Trading. The regulator should not be scared to have this fight armed with consumer access arguments.
The economic crisis, combined with the RDR timetable and rising fees, is creating an ever more dangerous cocktail which could create lasting damage to the sector. This danger must be foremost in the regulator’s mind in the coming months.