Plans to change the way firms are levied to fund the Money Advice Service could see advisers’ total MAS levies fall dramatically from £4.6m to £300,000.
The FSA has published a consultation today which proposes a new way of allocating the costs of the MAS’s “money advice” resources to FSA fee blocks. It proposes to allocate costs based on its data of how consumers use the MAS website, telephone advice line and face-to-face advice service.
If approved, the move would see the total cost for firms in the A13 fee block, which covers many advisers, fall a massive 93 per cent from £4.6m in 2012/13 to £300,000. The proportion of the MAS budget allocated to advisers would go from 9.9 per cent to 0.7 per cent, based on data which suggests 2.6 per cent of consumers who use the MAS do so for financial advice.
Under the proposals mortgage lenders would see their costs for funding the MAS soar by 1309 per cent, going from £1.1m to £15.5m. This is based on data showing 15 per cent of MAS users accessing information on homes and mortgages, a further 11.5 per cent accessing the mortgage calculator, and 3.3 per cent accessing mortgage comparison tables.
Firms in the A18 fee block, which includes mortgage brokers, will see their fees fall from £1.6m to £300,000.
The MAS has proposed a total budget of £78.3m for 2013/14, with £43.8m allocated to money advice and £34.5m for debt advice. The way debt advice costs are levied on banks, building societies and lenders is not changing.
The current fee block system for funding for MAS was brought in on a temporary basis when the service was launched in April 2011. The funding review was delayed until last May, when the FSA said the MAS would review its funding model for 2014/15. This review has now been brought forward to 2013/14.
If the new allocation method is agreed, 2013/14 MAS levies will be based on accumulated MAS data for six months. MAS money advice costs for 2014/15 will then be based on MAS data for the whole of 2013.
The FSA says: “The proposed allocation method gives a clearer link between how consumers use the money advice service provided by the MAS and which firms pay for it. The link is not perfect but it replaces an allocation method that has no such relationship.”
MAS director of service delivery and marketing communications Karen Broughton says: “We believe this is a fairer way of funding the MAS. We are keen to hear what the industry’s views are on the consultation.
“The most significant shift with this is the cost falls in line with customer demand. Where we are today is slightly outdated, and this needs to be revisited. It is more of a evidence-based approach, and tries to apply more logic to the fee structure which probably does not exist in the current model.”
Apfa policy director Chris Hannant says: “We welcome the FSA’s recognition that there needs to be a better relationship between how consumers use MAS services and which firms pay for it.
“We think this represents a step in the right direction. However, we should not ignore the fact the overall cost of regulation for advisers has increased. The FSA needs to keep a handle on the cumulative effects of significant fee rises on the advice profession and guarantee that fees are proportionate, fair, and do not reduce vital access to financial advice.”
The consultation closes on 22 February.