The FSA is aiming to implement a new fee structure for IFAs which could result in smaller firms with high turnover facing significantly higher annual regulatory fees.
In a document seen by Money Marketing, the FSA has revealed that it aims to change the tariff base for fee blocks from approved persons to an income-based measure for firms advising on investments.
The regulator has already created new income-based fee blocks for mortgage and general insurance inter-mediaries and has decided to drop its approved person approach for investment to deliver a “consistent method of charging across all these types of business”.
It aims to have this new structure in place by April 2005. Currently, firms with a single RI pay £1,525 a year while firms with more than 2,500 advisers pay £566 per adviser.
Sofa managing director Brian Lawless says he is worried that the FSA is taking this action as a way of increasing fees, questioning whether the move will make any difference to the administration of fees.
Lawless says he understands the rationale behind having a common fee structure but cannot see why the FSA has already decided to move straight to an across-the-board income-based model which he says would inevitably lead to higher fees for small, profitable firms.
London IFA Advisory & Brokerage Services chief executive Gareth Marr says: “In terms of risk, a key determiner is the advice each RI gives their clients, so the amount of RIs you have is a good way to determine risk. It is people who make mistakes, not numbers.”
Lawless says: “Changing the fees in this way will look like a back-door ruse for raising fees.”
FSA spokesman Robin Gordon-Walker says: “We are still looking at the pros and cons of moving to the income-based model. Increases would depend on how income is assessed and we will try not to have too much distortion.”