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FSA sets out new regulatory fee structure

FSA Front 480

The FSA has set the income threshold under which advisers would pay minimum regulatory fees as £100,000.

Income above this level would be subject to periodic fees. Mortgage brokers ad general insurance advisers, whose fees are already based on income, have the same threshold.

The regulator has published a consultation paper on regulatory fees and levies for 2013/14, following an earlier consultation paper in October 2011 which proposed changing the tariff base on which regulatory fees are calculated from a headcount basis to an income basis.

The £100,000 income threshold would apply to fee blocks A13, advisory arrangers, dealers or brokers not holding client money; A12 advisory arrangers, dealers or brokers holding client money; and A14 corporate finance advisers.

Currently, firms pay the minimum regulatory fee if they have less than two approved persons. Under the new structure the proportion of firms paying the minimum fee would go from between 35 per cent and 43 per cent to between 38 per cent and 46 per cent of firms.

The FSA has published indicative fee rates which show that firms in the A13 fee block, which includes advisers, earning above £100,000 would pay between £5.90 and £7.25 per £1,000. The figures are fee rates that might have applied if an income measure had been in force for 2012/13.

The FSA says: “Our analysis indicates that the fees for the majority of firms would either remain the same or decrease.”

At the moment the minimum fee is set at £1,000.

Estimate of firms whose fees under an income measure might increase or decrease by more than £1,000 compared to current 2012/13 fees:

FSA table regulatory fees 2013 480

Firms with lower than average incomes per approved person are more likely to see their fees fall while firms whose incomes per approved person are higher than average would see increases.

The regulator says increases for firms whose fees are likely to go up are likely to be higher than the fall in fees for other firms. It says this is because the current system allows a number of firms with high incomes to pay fees which are considerably less than firms with lower incomes.

The FSA says: “We do not underestimate the concern that large and sudden increases in fees may cause firms, but we believe that the amounts are in absolute terms affordable in relation to their incomes, and that the income measure provides a more equitable distribution of the costs of regulation.

“Setting the minimum fee threshold at £100,000 preserves the overall proportion of firms paying minimum fees only and keeps most of the existing firms under the threshold. Some firms will undoubtedly see some sharp increases in fees but, while no doubt unwelcome, they should be affordable in relation to the income generated by the activity.”

The FSA will consult on proposed fee rates in April and finalise them in June.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. This is a common sense approach and one that is fair too.

  2. Unintended consequences

    For those with income slightly above the threshold,
    another filip to the black economy! My fee is £x or for cash £x less 20% and a lower FSA levy. Now that we have to charge fees it is but a small step. What plonkers.

  3. I cannot understand the CP! As usual far too much effort is required to get to the nitty gritty but on the face of it this looks a reasonable approach by the Regulator.Using the number of RIs to set the fees was a little odd but I cannot quite agree with their rationale that this penalised firms employing part time advisers! Who can afford to employ part time advisers unless they are very profitable!

  4. I welcome this very timely proposal which hopefully recognises that small, client focused IFAs pose no threat to the investing public and deserve the regulatory dividend.

    However I believe it to be too little, and FAR TOO LATE!

    When the dust settles in 2013 the advisory sector will have been decimated and the investing public will face a very expensive gateway to the minefield created by the Sants Brigade.

  5. Not sure where you get the ” A13 current minimum is £1191.47,” I’ve just paid £1610.I’m a one man band and due to ill health my income has reduced to less than £10000 in the relevent financial year. Also, just for the well heeled down at Canary wharf, I’ve seen a 76% increase in fees over the last 5 years with this last payment representing a massive 26% increase on the previous year.
    Still, who cares,so long as the boys and girls at the FSA have , what I assume will be, a whopper of a xmas/leaving due, everythings ok!!!!!!!!!!!!

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