FSA stats: RDR costs could reach £2.6bn in 5 years

FSA Letters 480

The one-off RDR cost to firms could hit £1.5bn with total costs reaching up to £2.6bn after five years, according to the latest FSA figures.

Figures compiled by Money Marketing from FSA data suggest the total one-off cost to firms of all elements of the RDR could reach £1.48bn. The figures also suggest annual ongoing costs to firms of up to £233m, meaning the total RDR costs to all firms over the first five years could hit £2.6bn.

This represents a huge increase on the original FSA cost estimates of £430m one-off and £40m ongoing made in June 2009. It is also much higher than revised FSA cost estimates in March 2010 which put the total cost of the RDR to firms at between £1.4bn and £1.7bn in the first five years.

Last month, Money Marketing submitted a freedom of information request for the total RDR cost to firms and the regulator. The FSA did not give cost details but signposted relevant policy statements and consultation papers which it says contain the latest cost estimates.

Based on these figures, Money Marketing calculated firms’ one-off RDR costs of up to £1.48bn and up to £223m in annual ongoing costs which include adviser charging, the legacy commission ban, the ban on cash rebates and payments between fund managers and platforms, professionalism and data collection on adviser charging and complaints.

In addition to the costs to firms, the FSA’s costs have risen 303 per cent to £12.9m, up from an original estimate of £3.2m.

An FSA spokeswoman says: “We believe these changes are necessary to increase consumer protection by improving the quality of advice and reducing the incidence of misselling.”

Evolve Financial Planning director Jason Witcombe says: “This is an incredible amount to deliver the RDR, the focus should now be on making it work.”

RDR costs table-March 2013