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FSA rules out Aifa call for fairer fees

The FSA has ruled out carrying out further research into how adviser fees are calculated, despite comprehensive feedback from Aifa which says the current system is not proportionate.

In a consultation paper on regulatory fees and levies, published today, the FSA says it cannot justify carrying out a further review of fees and costs for IFAs.

Aifa submitted feedback to the FSA as part of the regulator’s strategic review of its costs allocation and fees model for 2009/2010 which calculated that IFAs paid a disproportionately high proportion of the FSA’s indirect costs compared to providers.

The trade body made two proposals: that indirect costs should be calculated according to the proportion of revenue advisers receive compared to the financial services industry or that adviser fees should be based on their proportion of revenue compared to that of product providers.

In today’s paper the FSA says: “The main consensus across all sectors of the industry is that we should move further towards a system of fees either based on the actual costs of regulating individual firms or on their individual risk profiles.

“Given that the revenue model is moving in the opposite direction to this we do not believe we can justify undertaking further research or work on it. However, we are happy to consider any further research undertaken by product providers and intermediary market participants working together to address practical issues and impact for both.”

Aifa consultants presented evidence to the FSA in November 2009 indicating that 69 per cent of indirect costs and overheads were not allocated to fee blocks, meaning these costs are spread out across the whole industry.

They calculated that if fee blocks were grouped into related activities, such as combining different adviser groups, then the total regulatory cost to advisers was almost equivalent to the costs allocated to deposit-taking firms, which was not proportionate to the risk they posed.

The FSA says it did not recognise this 69 per cent figure, saying indirect costs and overheads are not the same thing.

Other trade bodies responded to the strategic review for 2009/2010 fees arguing that the current system of fee allocation lacks transparency.

The FSA says it accepts this point, and will clarify its explanation of direct, indirect, and overhead costs in a separate consultation paper next February.


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There are 13 comments at the moment, we would love to hear your opinion too.

  1. FSA says to hell with AIFA 26th October 2010 at 1:57 pm

    The FSA is a animal out of control. It needs to be put down and quickly!

  2. The FSA’s response was a forgone conclusion against such a week body like Aifa.
    The only way we will get any justice is to keep on at your MP and make a nuisance of your self until they listen.It is our only hope

  3. Come on FSA, line us all up against a wall and shoot us. It would be quicker and cheaper than this ‘drip drip’ torture.You could then snuggle up closer in bed to the banks and live happlily ever after.

  4. Jennifer Nicholls 26th October 2010 at 2:12 pm

    Can’t they abolish the FSA now. Why wait till 2012. They have well and truly earned abolishment. They have got no idea of what they are doing, what IFA’s do and how to regulate anything. they won’t even accept help from those who have an understanding. Please god make them see sense. I am sick to death of hearing their negativity throughout our industry. It is quite plain that they want to get rid of IFA’s. And that also is the view of a lay person looking at the recent general conversations.

  5. The only way you could possibly get the FSA to listen to anything constructive is to withrdraw their funding. Sadly as the banks and insurers pay the bulk of this it is seems unlikely we will ever get a chance to change anything, the only solution is to leave the industry or carry on regardless and hope one day they see the light!!

  6. There are none so blind than those that will not see!

  7. Steven Farrall (Adviser Alliance) 26th October 2010 at 2:43 pm

    Lesson in economics for the FSA.

    Economies consist of people and things. Companies and Governments (and their unaccountable quangos) are just convenient admin fictions by which we try to better organise our lives.

    Hence IFA’s don’t pay the FSA extortionate imprests (payments for for failure?) – our client’s do.

    I recommend adding an explicit Regulatory Added Tax (RAT) to all invoices/commission receints or whatever.

  8. John A. Douglass 26th October 2010 at 3:09 pm

    Treating Customers Fairly?

  9. John A. Douglass 26th October 2010 at 3:11 pm

    Do onto others as you would they would do unto you?

    Unless you are the FSA with friends in Banks.

  10. Mind over matter 26th October 2010 at 3:26 pm

    They don’t mind and you don’t matter.

  11. No surprises there then, and it hardly helps our cause that the costs to the FSA of regulating the banks are negligible.

    There should, of course, be an independent body to arbitrate over disputes such as this but unfortunately there isn’t. The FSA lays down its own laws and anyone who disagrees can basically go jump off a cliff. Sounds to me like yet another issue on which a judicial review should be sought ~ goodness me, aren’t they ever piling up?

  12. This is a cost that the FSA SHOULD want to commit to, for TCF if for no other reason…. and it would be easily affordable. Indeed, such an expense should come BEFORE any bonus is paid out,perhaps then the bonus might even be justified….?

  13. What was the point of the FSA issuing a consultation paper, if they are not going to take any notice of submissions. Also, they are not being asked to undertake a further review, because they are still in the process of deciding this one.

    It is quite clear that the FSA are not concerned with how the fees are raised, and whether they are fair, as long as they get in enough money to pay themselves inflated salaries and bonuses.

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