Nic Cicutti: Apfa is misleading on regulatory costs

Nic Cicutti

For those of us at the sharp end of our business, journalism can be a ferociously competitive trade. Earning a decent wedge is great, of course, but what really matters to most of us who scribble for a living is a byline above the articles we write.

For some colleagues, however, what also matters is not just the quest for an author’s name to accompany the story, but finding the easiest way to obtain it. Maximum gain for relatively little pain, as it were.

The easiest way is through the clever re-nosing of press releases by big financial institutions, regulators, sometimes even trade bodies, that are guaranteed systematic coverage by all the relevant media.

Often, accompanying these major releases are others from smaller players, rent-a-quotes eager to garner a few column inches for themselves by commenting on the bigger story. If you play your cards right, you can whip up a 600-word piece in a few minutes simply by splicing together four or five press releases.

The best stories are so-called “franchises”: recurring articles based on a press release, one likely to require rewriting often, perhaps with a slightly different intro but where the central kernel of information is always the same.

Back in the day, I knew a colleague who virtually guaranteed himself several big bylines a week from stories that, to be perfectly truthful, virtually wrote themselves.

If I am honest, there is often also a mutual back-scratching interaction between us byline grabbers and the organisations putting out these press releases. They do us the favour of seeing our name in print and we give them the publicity they need, no matter how nonsensical the story.

Which is where, when push comes to shove, I firmly place the self-interested opinion-piece come-article by Afpa senior policy adviser Caroline Escott in Money Marketing just before the New Year, claiming small- to mid-sized firms are spending approximately 12 per cent of their turnover on regulation. This equates to 3 per cent on fees and levies and the rest on so-called “indirect regulatory costs”.

According to Escott, based on the number of advisers in the UK and an average number of clients, this means each client pays about £160 a year just to cover the costs of regulation.

These figures are, of course, nothing new. Last year Apfa carried out a survey that suggested exactly the same thing, always a disappointment for scribes who may not mind the odd similarity between stories year-on-year but tend to baulk at recycling identical copy every 12 months.

Moreover, while this may be Apfa’s second foray into an overcrowded “cost of regulation” PR market, the story has even longer legs. In March 2014 Aviva published the result of its so-called Adviser Barometer, which found that two-thirds of advisers estimated their costs to be over 10 per cent of turnover.

One third said it was between 10 and 14 per cent, about one in six IFAs declared it to be between 15 per cent and 19 per cent of turnover; one in 10 said it was between 20 per cent and 24 per cent; and a further 6 per cent put the figure at a quarter of turnover or more.

As with Apfa, the Aviva survey was suitably nebulous on the subject of what constitutes ‘regulatory costs’. At the time I questioned the figures, suggesting the only way this variation made sense was if “everything was lumped into “regulatory costs”, including not just the FCA fees themselves but PI, training and CPD, compliance, FSCS and so on. If so, that can’t be the right way of looking at things”.

Escott’s own throwaway definition of “indirect regulatory costs” includes “compliance support (internal or external) or management and staff time spent on regulatory returns”.

She does admit these estimates “are just that” but they “can be a helpful tool” when taken alongside Apfa’s campaign for a long-stop against misselling and poor advice, plus her trade body’s call for consumers instead of advisers to pay the Financial Services Compensation Scheme levy.

In other words, what Escott uses is unquantified and unscientific evidence about regulatory costs, into which she lumps everything including the kitchen sink to keep alive two profoundly anti-consumerist proposals.

The irony is in the same breath she also stresses Afpa works “closely with consumer groups to try to broaden access to professional financial help. We also believe it is incumbent upon advisers to be transparent and raise client awareness of the money they themselves pay to cover the costs of the complex and ever-changing regulatory regime”.

This transparency, in Apfa’s view, means giving out undefined “regulatory cost” statistics as if they were Gospel truth – which they emphatically are not.

The irony, as I wrote two years ago, is “the majority of compliant advisers are indeed paying a heavy burden to be under FCA scrutiny”. But the blame for this lies not on heavy-handed and expensive regulators but the fact that advisers are paying for a legacy of poor and sometimes dishonest advice by a minority of their peers.

Apfa would do well to remember you can dish out misleading and repetitive statistics once, sometimes even twice. But three times really is the limit – even for byline-grabbing journalists.

Nic Cicutti can be contacted at