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MM Leader: Fee reform needed to reflect realities of the industry

We hope the FSA will listen to Aifa’s campaign to challenge the way its budget is set on the basis that IFAs are paying disproportionately high fees.

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.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. The FSA talks about “these difficult issues of fairness” but is that as far as it goes?

    Talk is cheap = It’s easy to talk about something but harder to actually do it.

    What is so difficult about being fair, about being balanced? I see neither and after two and a half decades of regulation it seems to get worse…

    Retired IFAs struggling to deal with the FOS, current IFAs struggling to cope with an economic disaster brought upon them by the ‘credit crunch’ and regulatory arbitrage, like the little donkey or even the proverbial camel these isn’t much capacity left for carrying the entire system of regulation, strangulation by regulation, discrimination by occupation, disgusting it is.

    Fair and balanced? NOT.

  2. The Statutory Code of Practice for Regulators states that regulatory resources should be directed proportionately according to risk.

    From this, it follows logically that costs should be apportioned correspondingly across the various sectors of the industry.

    The IFA sector accounts for no more than 3% of all complaints so, by the above methodology, the share of the FSA’s (ever escalating) budget borne by the IFA sector should be no more than 3% either.

    So how does the FSA justify charging the IFA sector 25% of its costs? Perhaps Hector Sants or Dan Waters would be good enough to explain.

  3. Incompetent Regulators Award Team 16th April 2010 at 8:31 am

    Just to add to the above less than 1% complaints UPHELD against IFAs. This figure is so insignificant the argument of FSA rules should not apply to IFAs. We should have ouir own prfessional body run by IFAs who understand our business. That’s where the rules should be applied form. IFAs are just abused becuase we are an easy touch and have no proper voice or representation.

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