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How should FSA fees be calculated?

Last week it emerged the FSA is looking at basing adviser fees on income rather than the number of approved persons at a firm, but will this benefit your business or mean you pay more?

The Institute of Financial Planning has warned that fee-based firms investing in new systems and staff ahead of the RDR might be unintentionally penalised by the changes.

Chief executive Nick Cann says: “The FSA has to make sure any new structure aligns with plans for the RDR.”

Sifa is also concerned with the proposals. Compliance director Ian Cockerill says the structure could adversely affect professional IFA firms that provide holistic advice where the fees may relate to tax and other unregulated activities.

He says: “How can a holistic IFA define what income came from regulated and unregulated activities? If they charge more for taxation advice and less for regulated activities, that is advantageous to the proposed structure. On the other hand, they might just charge a single fee and will not know how to split any income made.”

Do you think your firm could face lower FSA fees if the calculation was based on income rather than approved persons?

Is there a better option for apportioning fees?

Post your comments below.


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Another Con Trick coming our way
    We all know the answer to this one don’t we? If the FSA can’t count – e.g. are running an insolvent organisation which needed to borrow £200 million to pay for salary rises, bonuses and a famcy pension scheme – I think we all know the answer. The government are allowing reward for failures. What’s new?

  2. Are you asking the right question?
    You say “will this benefit your business or mean you may more”.
    Shouldn’t the question be what method will be TAF (Treating Advisers Fairly) and should it not be this that anu argument by the FSA is based on or is it once again a case of do as I say (TCF) and not do as I do?

  3. FSA Fees
    Why dont the FSA make them selves a bit clearer and make regulation a bit simpler, by over complicating the whole financial industry has made most individuals join networks who exploit there members with expensive membership fees, if the whole process of selling financial products was simplified everyone would join the FSA direct and then fees could be bases on income as a percentage of commission earned on sales.

  4. Fees for the FSA
    I believe that the cost of consumer protection and fighting financial crime should be funded from general taxation via the Treasury and not as a levy on regulated firms and businesses. The current situation represents a tax on regulated firms which bears no relation to their income or outgoings. It also fails to provide any accountability to the firms that pay that tax. It is undemocratic and unfair.

  5. Accountability
    Linda Hulls comment that regulation should be paid for out of general taxation echoes a view that I have held for a long time.

    The argument that the FSA tends to put forward against this is that regulation ‘benefits’ firms, so they should pay.

    The FSA’s basic reasons for existence are:

    1) To regulate the financial markets and the firms that operate and make those markets, the objective being the maintenance of stability and thus confidence in, the system.

    2) To protect clients/customers/consumers to make sure that they receive a ‘fair’ deal.

    The FSA will argue that it is much much more complicated than this, but if they go back to basics (I know this is difficult for bureaucrats) then this is all it is about.

    IFA’s and brokers, who make up the vast majority of regulated firms, do not make or effect the ‘markets’ and it is the whole UK, not just clients,customers and consumers who ‘benefit’ from efficient and stable markets.

    Therefore this FSA argument is difficult to sustain.

    It is undoubtedly true that large firms and ‘market makers’ benefit from stable and properly organised markets, the achievement of which requires that there must be ‘regulation’, the amount of which is for another time.

    The way to pay for this is not however through ‘fees’ to the regulator (who has in any case failed of late to achieve it’s aim of stability) and should be considered in tandem with the implicit total guarantee that has recently been called upon by some banks. Some have effectively gone bust and been taken into differing degrees of public ownership and this has effectively bolstered the other banks, thus in effect guaranteeing them also.

    I believe Lord Turner is right in suggesting some additional tax on banks, who ‘benefit’ from this unwritten guarantee, after all they have traded heavily on their supposed financial muscle, integrity and basic strength. However it has to be structured in such a way as to show that it is effectively paying for this blanket guarantee of the whole of the UK economy standing behind these institutions.
    How this can be done needs work but a financial transaction tax would just be an additional cost passed on to the client and thus make London, potentially, less competitive internationally. If Adair really thinks he can get all the worlds other financial centers to play ball then fine, but he must know that even if he gets some measure of lip service it will never happen. The French and Germans are already trying to hamstring some London markets, ones that Frankfurt and Paris hardly operate in. So if the EU is not on the team than what hope for American and Far Eastern attitudes!

    No I think the FSA should be up front and accept that they are an arm of the Treasury and that they should therefore be ‘Civil Servants’ paid as such.

    Hopefully all this will not actually be an issue, If the Tories win the next election and stick to their guns and disband the FSA, without just moving all the staff over to the BoE then their will be no FSA staff to worry about. Just the repayment of the £200m o/d.

  6. How should FSA fees be calculated?
    If FSA fes are based on turnover how can this possibly reflect well on those firms that are efficient, have good systems and controls, appropriate processes and serve their cleints well? It assumes the greater your turnover the greater your risk to consumers. This has to be flawed.

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