Tenet has called on the Government to introduce a premium tax on all retail financial services products to part fund the FSA and Financial Services Compensation until a root and branch review of financial services regulation is carried out.
The network says a tax on products would be more transparent than regulatory costs being passed on to consumers through adviser charging and could help make the case for a full cost benefit analysis of regulatory fees and levies.
Tenet says the tax should be calculated as a percentage of the investment or product contribution and should be collected and allocated by the Government to cover the cost of regulation, the compensation scheme and consumer financial education initiatives.
Distribution and development director Keith Richards (pictured) says firms’ regulatory costs will continue increasing and the impact on small and large firms is becoming untenable in a shrinking industry.
He says: “The current funding strategy is clearly outdated and potentially broken, given the likelihood that costs and liabilities will continue to increase with fewer firms left to carry the burden.
“As an interim solution, we suggest consumers should pay a relative premium which is transparent and would apply to everyone, irrespective of distribution route.
“In a transparent and unbundled world, the consumer should understand the true cost of regulation and the price of the FSCS, which is a form of additional insurance to protect them that would otherwise continue to be fully factored into an adviser’s charging structure.”
In its consultation on FSCS funding, published last month, the FSA said a product levy would not be feasible because it would not take into account different risks of different products and transactions.
Carbon Financial managing director Gordon Wilson says: “There is definitely something needed to prevent the situation we we have now whereby good advisers are suffering from rapidly increasing costs and subsidising less prudent advisers.”