Aifa estimates IFA revenues represent around 2 per cent of revenues from FSA-regulated financial markets, yet advisers pay around 25 per cent of the FSA’s total costs.
The trade body says this disproportionate burden is caused by the FSA’s current fee model which means the regulator can only allocate 50 per cent of costs directly to relevant fee blocks.
It is calling for reform so that it allocates the indirect 50 per cent of costs to the correct activities and firms, a move it believes will significantly reduce IFA regulatory costs.
When Lord Turner took over as FSA chairman in 2008 he declared that IFAs were paying too much in regulatory fees. Although there has been a drop in fees for small firms since then, advisers are still paying far too much.
You can add to this the huge costs of meeting the requirements of the retail distribution review, both in terms of qualifications and adviser-charging, and the cost of the grossly unfair £80m FSCS levy.
The FSA must remember the disproportionate costs that are being inflicted on the IFA sector will inevitably be passed on to the consumer.
A major step in the right direction would be reform of the FSA’s fee model to more fairly reflect the make-up of the industry.