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Tyrie may be harder for FCA to brush aside than angry IFAs

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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

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. So here we have a sorry state of affairs where the regulator of the financial services sector, charged with consumer protection, the raising of educational and ethical standards and prevention of fraud, is incapable of admitting a simple (though profound)error and rectifying it. After all, it has only cost the affected firms £118m so no harm done.

    Leadership by example?

    How can any of us have trust and faith in the Regulator to deliver the outcome we all want when the body responsible for that oversight rides rough-shod over its own supposed principles.

    As Groucho Marks so pithily put it: “Gentlemen, I have my principles and if you don’t like those I have others”

  2. The real answer to this is simple really;

    The FSA/ Sants knew over 5 years ago that the numbers in fee block A13 were going to be vastly reduced come 01.2013, so reading between the lines, maybe this “anomaly” in the calculations of the fees was over looked/ignored or in my opinion designed ?
    You can hear the conversation now; “lets get as much money from them while we can and while the numbers are up, because we know 33% will be gone come Jan 2013” !!!

    And lets be honest here, 118 million is a hell of a lot of money !!! and either way you cut it; it still boils to theft !

  3. It’s ok when anyone is accused of poor advice or mis-selling just say “That’s not mis-selling, it’s just an anomaly”

    I wish people would follow my lead and tell it like it is, they are not just inept, they are corrupt!

    There is no benefit of the doubt, they won’t give it to you. The FCA and it’s various predecessors are not fit for purpose, never have been and never will be!

    #Sacktheparasites!

  4. Peter Davies @ Create Wealth 4th February 2014 at 5:15 pm

    Great article Paul and thank you for taking this up on our behalf. JGJ a little new to this role and from an auditing background. Difficult for him to know everything that is going on at the FCA but overcharging is exactly what it is and in any industry or service it has to be rectified. Let’s hope the TSC will see sense, otherwise I see another law suit pot dentally arising.

  5. Andrew Tyrie can huff and puff ’til the cows come home but the bottom line is that the TSC has no powers to force the regulator to do anything at all, on either legal, moral or ethical grounds.

    Much the same thing happened back in 2011 when Andrew Tyrie asked Hector Sants to reconsider the FCA’s implementation date for its RDR. Sants returned to his office and, having given the matter no further consideration whatsoever, dashed off a response that basically said No, so stick that in your pipe and smoke it.

    Tyrie responded with a letter rebuking Sants for the indecent haste of his response and Sants replied saying basically Yeah, well, okay, but 1.1.13 remains our Red Button Day and that’s our final word on the matter. What could Tyrie do? Nothing, and so the FSA’s deadline remained unchanged.

    This time round, Wheatley hasn’t even bothered with agreeing to go away and reconsider the FCA’s stance on refusing to refund the £118m that IFA’s have been overcharged ~ he just rejected Tyrie’s request to his face. Again, what can Tyrie do? Nothing. And nor can anyone else because, as it did in its previous incarnation, the FCA enjoys statutory immunity from prosecution. The FCA is above the Law and above even the will of Parliament.

    For heaven’s sake, if you pay too much tax, HMRC sends you a refund or, at the very least, awards you a credit against your next tax bill. So the FCA, like the FSA before it, is even less accountable than HMRC.

    This deeply unjust state of affairs is so blindingly obvious that one has to wonder why none of our so-called representative bodies appears to be making any efforts whatsoever towards the creation of a Statutory IROC with the unassailable authority to tell the regulator either This is wrong and you’re not going to do it or This wrong and you’re going to have to remedy it.

    Many years ago, the PIA was described as an unbridled monster, free to ride roughshod over anyone or any body that dared to try to stand in its way. What’s changed since?

  6. Julian. I very much understand your extreme frustration which I share. Your past examples of inaction are correct, but at least we have the satisfaction that Sants had a nervous breakdown as a result, so clearly there is a God after all. However, to be serious, one ignores a Parliamentary committee at one’s peril, they are highly influential and can make life very uncomfortable for those who take them lightly or who are dismissive.

    We are fortunate indeed to have Tyrie on our side. He understands the Regulator and more importantly he understands retail financial services (blimey ! there’s a ‘first’!!), so we should support him.

  7. I fully support Andrew Tyrie in his efforts to hold the FCA to account but the fact is he’s powerless to do so and he appears to be making no effort to change that. So of just what actual use is he or his Committee? All they do is ask questions but hae no power to do anything if they consider the responses they receive to be unsatisfactory or downright defiant. What’s the point? None whatsoever that I can see.

    That aside, here’s a thought ~ what would Martin Wheatley’s stance be had the FCA discovered that, in its previous incarnation, it had UNDER-charged the intermediary sector to the tune of £118m. A pound to a penny he wouldn’t just shrug his shoulders and declare that what’s done is done and cannot now be undone.

  8. This again highlights the incredible position that the FCA holds – unaccountable to the elected or any other body in the UK or EU.

    Most politicians display a total lack of interest in financial services and equate the whole industry with the banking fiascos.

    My own MP is a Treasury Minister and told me in no uncertain terms that he will always follow the party line regardless of its sense or lack of balance.

  9. My final word on the matter is that I understand everyone’s frustration and cynicism and I share it, but unless we support those who are supporting us there is not future or optimism for change. So, we either sit and whinge in which case the FCA will continue their bad practice, or we do something constructive.

  10. @ Alan

    Re-MP’s and their stance on the matter; I have written twice (through write to them) to my local MP once when the story first broke and again when Wheatley said he was not going to pay it back !

    To date no reply to either or even an acknowledgement, I think this speaks volumes and this is a very sad state of affairs

    I cant wait for him to pop round and ask for my vote,

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