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Professionalism rules will cost advisers up to £225m by 2013

The FSA says it stands by its cost benefit analysis for the new professionalism requirements, which it estimates will cost advisers up to £225m by the end of 2012 and up to £12m in on-going annual costs from 2013.

In its final rules on professionalism, published today, the FSA says it has not underestimated the cost of the rules, as argued by some respondent to the consultation paper on professionalism, published in June.

In CP10/14, the FSA said costs to the regulator would be in the range of £4m to £5m initially and £3.5m annually. It estimated the total costs to advisers would be between £155m and £225m to meet the standards required by the end of 2012 and £3m to £4m annually after that.

The FSA says in addition, advisers will also incur the costs of independent verification of their compliance with professional standards.

It states: “As this market does not yet exist, we estimated costs to advisers at between £3m to £8m each year based on information from potential accredited bodies. This was likely to be an overestimate, as most advisers already belong to professional bodies and therefore may not incur additional costs.”

The FSA believes statements of professional standing, which independent and restricted advisers will be required to hold from 2013, can be delivered for between £60 to £175 per adviser.

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Steven Farrall (Adviser Alliance) 20th January 2011 at 12:43 pm

    ‘Economies consist of people and things. Companies and governments are just convenient admin fictions by which we – try – to better order our lives’. So, it is not advisers that will pay these extra costs, it’s our clients. This is, in FSAspeak epic ‘consuemr detriment’ . This is ‘money taken out of the economy’ by regulation. This is wealth destruction by regulation.

  2. If they dont drive us out one way they will do it another. We are not a bottomless pot. If we all give up, where do they think their exhorbitant costs will come from. Please feed them whatever is needed to come into the real world

  3. The issue that the regulator is staying blind to is that the cost of giving (or receiving) advice will be such that good quality advice from independent IFA firms will be beyond affordability to a high precentage of the poputation. It is probable that those will be the ones that needs most advice and guidance.

  4. Milk Maid - by Simon Mansell 20th January 2011 at 1:30 pm

    Yes but do remember that the FSA is totally in·nu·mer·ate! Last time the FSA got their calculator out to cost RDR their estimate needed a further 180% increase. Worryingly, their estimate in 2008 was £600 million, it now stands at between £1.4 billion and £1.7 billion (and going up) according to their own market research firm Oxera

    – But hey ho whats a few million here or there, when you have an IFA milk cow and total control over milking control!

  5. in·nu·mer·ate 20th January 2011 at 1:37 pm

    Cost of Study – 500 hours X £150 (fee time) per hour = £75,000 X 27,000 (number of advisers) = £2,025,000,000 in lost fee income!

  6. Very shortly the only people who will be able to afford Independent Financial Advice from smug fee charging advisers will be employees of the FSA,who clearly have not got a clue.

  7. How come this wasn’t thought of as part of the Grand Conception which eventually became the Retail (we’ll screw you into the ground with) Regulation Review (which appears to have precious little to do with Distribution, given that distribution is the primary province of the banks)?

    It’s just one more bolt-on afterthought. Another £225m? Hey, what the hell? It sounds good, could make us look good and, as always, the Great Unwashed will pay so why should we worry?

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