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Advisers hit with higher regulatory costs spread among fewer firms

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Final figures on Financial Conduct Authority fees show advisers will be hit with higher regulatory costs than expected which will be spread among a smaller number of adviser firms.

The FCA has published its policy statement on regulated fees and levies for 2013/14, following a consultation in April.

The policy statement reveals while the proportion of the £432.1m FCA budget that falls on advisers remains the same as the April consultation at £41.9m, they will receive a smaller fees discount as result of retained FSA fines.

The A13 fee block, which covers most financial advisers, will receive a £3.8m fees discount, rather than the £4m first proposed.

The discount means advisers in the A13 fee block will have to pay a total of £38.1m in regulatory fees, up 16 per cent from £32.8m in 2012/13.

The cost burden will also be shared among fewer firms than first thought. In April, the FCA estimated the number of firms in the A13 fee block had fallen from 7,086 in 2012/13 to 7,000 for 2013/14.

It now estimates there are 6,788 firms in the A13 fee block for the next financial year.

Around 42 per cent of FCA firms will continue to pay the minimum fee of £1,000.

The FCA will now start invoicing firms following the policy statement.

The FCA announced in April it is carrying out a review of how firms’ regulatory fees are calculated. Options include segmenting the industry based on income, or replacing the current-fee block model with a fees system based on risk.

In its policy statement, the regulator says it has met with 10 trade bodies as part of the fees review and will meet with other stakeholders who asked to take part.

The FCA plans to issue its proposals for changing how fees are allocated in October or November.

Firms can use the FCA’s online fees calculator to work out their regulatory costs.

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Comments

There are 19 comments at the moment, we would love to hear your opinion too.

  1. What a joke. The FCA is on course to totally wipe out advice as smaller firms will be priced out.. No doubt the FCA will employ more staff to look after less firms and pay themselves higher salaries and bonuses.

  2. I have been banging on about this for 3 years and folks have been more concerned about exans. 16% INCREASE is just the tip of the iceberg, unless the FCA trims its costs/headcount there will need to be another 16% increase next year and that is without plugging their pension deficit!

  3. Just one question really…given that fewer firms will be asked to meet the set figure for total annual fees as laid down by the FCA and understanding that the latest policy statement makes clear that this will result in each firm affected having to pay more to meet this figure…what are the extra services and support that the FCA will be delivering to firms that support this hike in fees? In essence, what is the added value associated with the increased fee? Surely, firms are not being held responsible and therefore expected to simply finance the reduction in firms that qualify to make up the short fall! After all, that would not be TCF, now would it.

  4. The FCA carry on regardless.
    When calculating our fee data for the FSCS levy we argued with the FSA that it was impossible to split fee income as per their SC02 and SD02 categories. Our investment income was only a method of paying for advice. Pension income can only pay for pension advice but the FSA could not get their simple minds around the simple concept that investment income can pay for other services including pension advice. They told us to split our substantial fees on the basis of historical product income – simple and auditable.
    Now, using a fee based system linked to client timesheets we now know that our income and fees relating to life and pensions advice is twice as high as we had thought – previously we could not prove it. Because we submitted Fee Data based on an outdated concept our FSA invoice is circa £3,000 higher than it should be.
    The FSCS levy is fundamentally flawed and the high and mighty FCA need to get their head out of the backsides and understand that we give advice and that product related data is absolutely meaningless. Unfortunately I suspect that many IFAs do not appreciate this!

  5. Dick Sprinkler 1st July 2013 at 10:32 am

    Well I’ll go to the foot of our stairs !!!

  6. If the FCA is going to charge the remaining firms for the cost of regulation then may be the FCA should at least start cracking down on unauthorised firms and advice givers. Surely this will also protect their revenue stream as without us there is no regulator.

    Just £1.6 million in 2013/2014 of the £432 million FCA budget is spent by the Unauthorised Business Department who have responsibility for cracking down on unauthorised advice and websites.

    Surely the FCA should be spending more of their budget on doing one of its main primary objectives – and just in case the FCA forgot it, it is PROTECT THE CONSUMER.

    Surely that means cracking down on unauthorised advice and so-called execution only services!

    How many ex-advisers who used to be regulated have now opened up so-called financial planning firms, and that’s not me including solicitors offering wealth management services and holding no FCA registration. What action is the FCA doing about this? Maybe these are questions that money marketing should be asking rather than just concentrating on the headline figure.

  7. Imagine if you introduced this fee ike to your clients?

  8. Same old people sat at the same old desks with same old objectives spending (oh sorry wasting) more money on themselves and crack pot regulation.

    Welcome to “Zombie regulation”

    FCA must think a budget is something you feed trill too.

  9. I actually wonder if this is good for regulation (and the regulators) – let alone the impost on the regulated.

    If you accept that they are not stupid at No 25, then there is now bound to be some friction between the costs they consider necessary to regulate and the diminishing number of advisers. All the comments concerning the increasing burden on fewer advisers are valid. I don’t really believe that the regulator is there to wipe out small firms. There will no doubt be a wider realisation in other places that increases of this magnitude cannot (and must not) continue.

    Therefore one wonders whether the regulator will now tread softly on sanctions to avoid reducing their paying clientele still further. If so that surely is not an ideal outcome either.

    I would hope that this increase is a one off.

  10. @ Anonymous 10.35: I have saved this page as a PDF and intend to do exactly that- Increase fees by 16% but only 16%, therefore no better off. All I have done is stand still. I will be putting a copy of the page into every client file to document this. I could not care less what the FCA say about adviser charges, but they must reflect regulatory fees and show what these are.

  11. If this is the regulatory dividend who knows what might have happened…..

  12. So the FCA met with trade bodies and other stakeholders did it?….. and no doubt TOLD them what was going to happen.

    Bit like Stalin ‘consulting’ his victims.

    Good ‘ere innit?

  13. The RDR was designed to make costs of advice more transparent. Put a detailed list of everything you pay to FCA/FSCS in your terms of business, that way clients will know that from your 1% or whatever your charge is, you have to find 16% to fund the regulator.

  14. Penile Dementia 1st July 2013 at 1:52 pm

    This is the result of the armed forces receiving most of the fine income.

    Given that the army has just made my nephew redundant and paid him a shed-load for his trouble the logic seems irrefutable.

    With only 70% of the FSA staff numbers and a reduced remit you would be forgiven for thinking that the costs would actually decline.

  15. Only when the FCA fee income diminishes enough to be trading at a loss will the FCA “business” costs be addressed. About 3 years I estimate after a load more IFA’s throw in the towel along with no new blood to replace them.

  16. Julian Stevens 1st July 2013 at 6:14 pm

    Same old story ~ lack of accountability. The regulator defines its own objectives, decides its own priorities, sets its own performance targets and then announces to the world at large This is what we’ve worked out that it’s all going to cost for the year ahead, so pay up or pack up.

    APFA’s representations, meanwhile, are casually swatted aside with the indifference of an implacable tyrant, whilst the TSC is just humoured but not actually taken any notice of.

  17. Julian Stevens 1st July 2013 at 7:19 pm

    Will the last firm to buckle and go under please turn out the lights.

  18. What is the difference between all those countries, looked down on and crticised by the uk government, for oppressing it’s citizens, and the UK?

  19. Incompetent Regulators 5th July 2013 at 5:15 pm

    How very NON PC. Taking advise away from the poorer people.

    This is weird when we have media driven reports on poor old benefit scroungers who can’t afford many overseas holidays, cars, mobile phones, Nike shoes for their illegitimate teenagers.

    God how will they cope without financial advise. Oh yes I forgot their is a benefits system for all the lazy losers out there that we workers pay for.

    Politics makes me sick.

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