The FSA is currently consulting with the industry on possible changes to the fee structure, following an announcement in its 2009 business plan.
It has confirmed to Money Marketing that one proposal it is currently talking to trade bodies about is to base the IFA fee structure on income rather than number of approved persons.
The regulator has set up an industry working party meeting tomorrow, but says the process is at a discussion stage and it has not begun to implement any formal consultation.
The trade body for solicitor IFAs, Sifa, says the regulator is considering a change towards an income fee structure similar to that of the mortgage and insurance industry.
Sifa compliance director Ian Cockerill says: “We suspect this has been mooted as an idea after the FSA realised it is illogical to run two fee structures.
“It may be that the FSA thinks there wouldn’t be a lot of difficulty in changing the IFA structure, and haven’t realised there are a few things that stem from it that do potentially cause problems.”
Cockerill, who is part of the working party, says the new structure would penalise professional IFA firms who provide holistic advice for which the fees may relate to tax and other unregulated activities. He says: “How can a holistic IFA define what income came from regulated and unregulated activities?
“If they charge more for taxation advice and less for regulated activities thatis advantageous to the proposed structure, but on the other hand they might just charge a single fee, and will not know how to split any income made.”
Sifa says the move would also penalise success and efficiency and would favour small commission-based advisers.
Cockerill adds: “We think at the moment it seems that the model of this potential fee tariff follows a more commission-based sales model rather than an advice model.”