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FCA under fire over advisers’ £74m regulatory bill

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The FCA has come under fire over its budget for 2016/17, which again hands huge bills to advisers.

Published as part of its business plan this week, the proposals show the FCA will ask investment, mortgage and general insurance advisers to pay 28.4 per cent of its budget.

As a result some £133m that will be taken from this group of advisers, more than the contributions of both insurance providers (£60m) and deposit taking bodies such as banks (£128m).

Advisers in the A13 fee block will have to pay £73.7m towards the regulator’s overall budget of £519.3m. This remains relatively flat year-on-year.

The FCA says it will keep the minimum fee, paid by 37 per cent of regulated firms, at £1,084.

Informed Choice executive director Nick Bamford says: “The banks are massively bigger and have been repeatedly hauled up for misselling of late, so I cant understand why advisers have to pay so much. It doesn’t make sense.

“Did the FCA not read the FAMR and find that maybe cutting costs would make advice more accessible? There’s a real lack of joined up thinking here and at the end of the day, we might pay directly, but the consumer pays indirectly.”

Yellowtail Financial Planning managing director Dennis Hall adds: “It’s become clear that trying to engage or argue with the FCA doesn’t work. We saw that when they rejected the long-stop.

“Consumers should be asking whether they are getting good value from the FCA, because we certainly think they’re not.”

The FCA says the 8 per cent increase in its overall budget for 2016/17, from £481.6m last year, is due to it taking on additional responsibilities for supervising the consumer credit market, as well as changes to accountability rules and the mortgage credit directive.

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Comments

There are 12 comments at the moment, we would love to hear your opinion too.

  1. What is the balance of complaints per year and proportion of financial risk?
    I suspect the cumulative total of complaints for banks etc will be well in excess of a 500000 (even after the PPI issues) and for the Adviser community well below 5000.
    Put the regulatory costs where the proven risks are….does anyone have that actual complaint numbers breakdown?

  2. Time to disclose regulatory and PI costs in our Client Agreements, then consumers can see why the cost of advice is perceived as too high.

  3. 2 in 1,000 successful FOS Complaints!

    It will get worse… it appears that the FCA has been told to lay off the banks. To substantiate a £500m+ empire they need to find/invent miscreants – guess who that will be

  4. I am unhappy about the FCA resources being targeted at areas which we, as advisers, should not be paying for. We give old fashioned advice and if the FCA feels that robo-advice or automated advice is the way forward then those partaking in it should pay for FCA resources in this area. Likewise FSCS fees in the future. I know that the fee blocks will be looked at more closely but frankly it is wrong that we are paying a lot of money now for work that does not really affect what we do.

  5. We are the FCA’s toilet, and every time they get a dicky tummy it’s us who pay the price for the clean up ! it’s no more complicated than that……. the reason for this… is, “POWER” we have none !

    They can do what the bloody hell they like, and they make that publicly known

  6. Next year they will be blaming the increase on the additional costs arising from the regulation of the claims management sector!

  7. James Robertson 6th April 2016 at 3:23 pm

    Quis custodiet ipsos custodes?

  8. Apart from MPs pensions what else has gone up 8% without a massive outcry and calls to justify the increase. When will they be required to show accountability for their spending of other peoples money?

  9. Steven Pearman 6th April 2016 at 5:17 pm

    The lunacy continues. A new delivery of Ivory and gold will be arriving at budgey cove for those that are still allowed to line their pockets after continued failure.

  10. Living the Dream Dream ..... 6th April 2016 at 8:02 pm

    @ James Robertson …. indeed, who will guard the guards!

  11. All advisory firms in a post RDR world have had to look carefully at their proposition, segment their client base and decide what to charge their clients taking into account the underlying costs of running their business.

    This would include things like staff cost, regulation, accountancy, capital adequacy, legal, utilities, insurances, office premises, FSCS, taxes, NI, pension contributions etc.

    These numbers would then be incorporated into some P&L software and in Mr. Micawber speak, doing the ‘math’ on the tried and tested formula of “Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds and six pence, result misery”, and see what the outcome is for them.

    Financial advisers in fee block A013 may be interested to know that for the fee year 2015/16 the latest forecast for FCA regulatory fees to be invoiced was £74.85m.

    So, with this thought in mind, we asked if the regulator could confirm what it actually costs to regulate this group of adviser firms.

    The reply should be the cause of some concern.

    Dear Mr. Bradley
    Freedom of Information : Right to know request
    Thank you for your request under the Freedom of Information Act 2000 (the Act) for information aboutFCA Regulatory Fees, specifically:
    The amount levied in FCA regulatory fees for firms in the A013 category (Advisory only firms and advisory, arrangers, dealers, or brokers) in 2015.
    The actual cost incurred by the FCA for regulating those same firms in the A13 category (Advisory only firms and advisory, arrangers, dealers, or brokers) in 2015)”
    Following a search of our paper and electronic records I am writing to tell you that we do not hold the exact information you are seeking, for the reasons set out below.
    Point 1: We have still to complete our invoicing for the fee year 2015/16, but our latest forecast for FCA regulatory fees to be invoiced in respect of A13 fee block for the period is £74.85m.
    Point 2: We no longer carry out an exercise where the actual costs are calculated against each fee block compared with the fees invoiced. We consulted on stopping this exercise, referred to as a ‘true up’ exercise in CP10/5 (March 2010) Chapter 9 paragraphs 9.16 to 9.20 http://www.fsa.gov.uk/pubs/cp/cp10_05.pdf. We did not receive any objections to that proposal.
    The amount of our annual funding requirement (AFR) allocated to fee-blocks is based on where we plan to use our resources in the next fee-year. We consult on the fee-rates to recover these allocations in our annual March fees-rates consultation paper (CP) and feedback on responses in a June Policy Statement. For 2015/16 the allocation to the A013 fee-block was confirmed as £74.9m in Policy Statement PS15/15 Chapter 2 which includes our feedback on responses to the March CP.http://www.fca.org.uk/static/documents/policy-statements/ps15-15.pdf.

    If I may draw on another Dickens quote from ‘Little Dorrit, “I am the only child of parents who weighed, measured, and priced everything; for whom what could not be weighed, measured, and priced, had no existence.”

    The FCA, who seem to have a data metric on just about anything and everything cannot quantify what it costs to regulate this fee group yet they know what to charge?

    I find this hard to believe. A regulated firm would not be deemed fit and proper if it had no idea of what it costs to run their business.

    The time has come for some openness. To simply say that “We no longer carry out an exercise where the actual costs are calculated against each fee block compared with the fees invoiced” is just not good enough. This is a simple P&L exercise surely?

    And as for not getting any objections to their ‘true up’ exercise, I think they should assume that they might well have one or two now.

  12. We are the easy target and we as a group are virtually mute. We have no voice and don’t fight back.
    Bullys in the school playground only take advantage of the weak kids, they never go for those who will give as good as they get. As long as we meekly give our dinner money to them they will gladly keep taking it.

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