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FSA to overhaul IFA regulatory fees

The FSA is proposing to change the basis on which it calculates adviser firms’ regulatory fees from the number of approved persons to a firm’s income.

The regulator has today published a consultation paper on policy proposals for regulatory fees and levies.

It says the move follows concerns that because the regulatory fees of certain fee blocks were based on the number of individuals in a firm, this did not take into account part-time working or job-sharing arrangements.

Fees for firms in the A.13 block, which includes most IFAs, are based on the number of approved persons registered under the CF30 function.

Until 2007, authorised persons were authorised under different customer functions such as investment adviser, pension transfer specialist and investment management. Authorised persons were allocated to different FSA fee blocks according to their customer function.

However this changed under Mifid in October 2007 which brought the different CF functions under the one CF30 function.

The regulator says this made it difficult to allocate authorised persons to fee blocks.

The FSA says: “Working with an obsolete tariff base is inefficient and generates more work for us and firms. We need to establish a fair and more efficient way of calculating the fees for these blocks.”

The FSA decided to replace the headcount basis with an income measure for calculating the Financial Services Compensation Scheme levy in 2008 and implemented the new income measure in 2010/11.

The FSA plans to implement the new tariff base for 2013/14, with data based on firms’ financial years ending during 2012.

Firms will be expected to report their ‘regulated income’, which the FSA defines as the net amount of income from advisory and consultancy charges, brokerages, fees commissions and related income from their regulated activities.

The total would include any interest from income related to regulated activities.

Rebates to customers would be excluded,  as would fees passed to other authorised firms.

The FSA acknowledges as the income reported will be based on earnings during 2012, firms’ first year of reported income  may include commissions which will have to stop post RDR. Income will also include ongoing commission from previous business for several years.

Firms will be able to report their income through section J of their RMAR regulatory return. The FSA will write separately to firms that do not report their tariff data through the RMAR.


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. Which is a complicated way of saying we will be paying more very soon. Thanks.

  2. After the FSA have decimated the number of IFAs after RDR, they will need to get the Christmas Party paid for somehow, so the remaining few will pay more, last one standing turn out the lights. Funny how is going to be based on income that may stop post RDR.

  3. Just in case we did not already have enough to do pre RDR, the fsa decided to give us some more, no doubt section J will take forever, adding yet more cost & time consumption for advisers who are already stretched to near breaking point

  4. Is this a good thing or is it a bad thing?

    Until you know the answer what is the point of moaning about it?

  5. Its BAD
    Everything the FSA touch is BAD.
    No thought for the IFA or how l this will affect the IFA business.
    RDR will waste the industry.

  6. Does this mean the FSA will be working on a commission basis, the more business we get paid on for advising the more they get paid?

  7. So if Financial Planning is in itself an unregulated activity, should we as individual planners earn an unregulated say £70K a year each and pass the plan ti our regulated firm for implimentation through the regulated activity of intermediation/product purchase?

  8. At last the admission that Adviser Numbers will reduce dramatically. If they charge on headcount then FSA income will fall?
    My concern is what do they consider “income” Turnover, Gross Margin, Pretax or Zero
    I’m in the later section so i would argue thats the basis of assessment. They wont get any income off me then.

  9. This will be great for transparency. If the FSA charges, say 2% of turnover, we can put this clearly on our client agreement and client invoices as a tax so that it is clear what the FSA costs and whether in the clients mind it provides value.

  10. This is an inconsequential action. IFAs need to band together to stop RDR. It’s not too late. RDR will decimate the industry – I have calculated that if I sell in 2013 EXACTLY what I sell in 2012 my income will drop by about 43%. TCF??? What about TAF – Treating Advisers Fairly? (Sorry to be anonymous but I don’t trust the FSA).

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