The FCA has pledged to put advice costs at the centre of its forthcoming review of the Financial Services Compensation Scheme.
Investment advisers will contribute £116m towards the 2015/16 FSCS levy, while life and pensions advisers will pay £100m. The total levy has been set at £319m.
Addressing the Treasury committee yesterday, FCA chairman John Griffith-Jones admitted the regulator needs to pay more attention to the impact FSCS levies have on advisers when it analyses the structure of the scheme’s funding.
A reassessment of the FSCS will take place after the Financial Advice Market Review, he said.
“When we do our review of the FSCS I think we will need to concentrate much more on the fairness of it amongst IFAs than perhaps was the case last time around, when the attention was on what happens if the banks can’t afford their bucket, rather than the IFAs.
“It needs to come after the FAMR work, but we need to concentrate a bit harder on the impact on the IFAs.”
Griffith-Jones also said recent increases in the regulator’s fees had been driven by recruitment to allow it to take on additional responsibilities in competition, payment systems and consumer credit.
On average, FCA fees increased 7.9 per cent in the last review.
However, Griffith-Jones admitted such rises are unsustainable.
He said: “Do I accept that we can’t go on increasing fees at 7.9 per cent? Clearly, because at some point the equation ceases to work.”
Acting FCA chief executive Tracey McDermott said the regulator is concerned about the “lumpy and unpredictable” nature of FSCS levies and pledged a fundamental review of the way the payments are structured.
She said: “[We will] look at the question of how that liability is paid for, because obviously you pay for the FSCS when you are paying for firms that have gone out of business having missold to their clients.
“So the good guys are paying for the problems caused by the bad guys, and we are going to look at that.”