It was pretty incredible to hear the FCA chairman say he was not even aware that the adviser fee block had been “overcharged” by £118m over the past five years when quizzed by MPs this morning (we’ll ensure he’s added to the MM comp list).
I’ve put overcharged in quotations as it’s a term FCA chief executive Martin Wheatley refuses to acknowledge in relation to the matter- presumably because it would leave him more exposed to calls for compensation from advisers.
His argument seems to be that fees were based on the rules as they were at the time and therefore the term overcharging is incorrect. But that’s just messing around with semantics.
The FCA fee paper acknowledged an “anomaly” in its previous calculations around the amount of money firms in the A13 block, which contains most advisers, have been paying in regulatory fees. It therefore announced a change in policy to rebalance the fee blocks in a move that will see those in A13 pay less.
To most people this would amount to a case of significant over-charging for past fees. Imagine if a regulated firm used such tactics to argue against paying back clients who had been excessively charged in the past?
Following the FCA’s admission of its fee charging anomaly in November, Money Marketing calculated this had cost firms in the fee block a combined £118m over the past five years – a figure we presented to the regulator alongside our calculations and one it had no argument with.
After Wheatley’s recent refusal to consider a way of compensating advisers for the extra costs endured, we mentioned the strong concerns of our readers to the Treasury select committee.
It appears the MPs are taking the matter much more seriously than senior regulators.
This morning, Tyrie said: “On the basis of the information put to me there is a strong case for compensation in returning this money, a strong case.
“This money clearly should not have been charged once you look into the detail of it. These firms have clearly been put at a disadvantage. Their customers have been charged more than they should….. I am surprised you are so firm this is not overcharging.”
After expressing astonishment at his lack of knowledge on the subject, Tyrie asked FCA chairman John Griffith-Jones to gen up and consider a review of his chief executive’s position on compensation.
Few people are asking for the full amount to be refunded straight away. The money has to come from somewhere and there will be some complications around redistribution.
But that doesn’t mean the mistake should not be rectified. After ignoring the anger of advisers, let’s hope pressure from Parliament leads to an FCA rethink.
Paul McMillan is group editor at Money Marketing- follow him on twitter here