Tenet proposes premium tax to fund levies
Until a fundamental review of the entire industry and regulatory structure is undertaken, Keith Richards, distribution and development director for Tenet, said a premium tax could help fund the FSA and Financial Services Compensation Scheme levies.
He suggested the premium could be charged on products and investments, which would be fairer and more transparent than advisers having to factor these ongoing increases into their fee structures.
The collection of such a premium tax would potentially introduce a role for the government and make the case for effective cost-benefit analysis more visible than at present, Mr Richards claimed.
Mr Richards suggested a regulatory and compensation scheme premium would work by charging a percentage of the investment or product contribution, akin to that of insurance premium tax on general insurance products.
He said: “Advisers accept the principle of levies at a fair and sensible level and in addition bear the cost of increasing operational compliance and professional indemnity insurance to protect clients. The current funding strategy is clearly outdated and potentially broken, given the likelihood that costs and liabilities will continue to increase with fewer firms left to carry the burden.”
Mr Richards said consumers should understand the true cost of regulation and the price of the FSCS, which is a form of additional insurance to protect them.
It comes as Tenet research showed increasing regulatory costs and exposure to mounting liability are becoming the second main reason behind adviser exits.