Your IndustryAug 8 2014

Adviser regulatory fees surge 30% as funding change bites

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
comment-speech

Financial advisers are beginning to receive their regulatory fees and levies invoices for the year, and for the majority it is not good news.

A number of advisers spoken to by FTAdviser have hit out over fees that have risen by 30 per cent or more in some cases, driven primarily - if not entirely - by a substantial hike in the Financial Services Compensation Scheme levy as a result of a change in how it is funded.

Under its new 36-month funding approach the FSCS did warn that levies would be high this year, increasing a likely levy of £76m to a confirmed £112m. The new model is designed to give greater foresight and should remove the need for interim levies.

One financial adviser, who wished not to be named, said his total levy which includes fees to the Financial Conduct Authority, FSCS, the Financial Ombudsman Scheme and the Money Advice Service, has jumped 31 per cent since last year.

He said: “Very little has changed since last year although I do have a little more business coming in, but there is nothing to justify that fee increase”.

Another adviser has seen his total fees and levies jump 22 per cent. All elements of the bill have remained around the same price as last year, except his FSCS levy which doubled since 2013 and now amounts to 35 per cent of the overall cost.

As a relatively small practitioner, he was angry at having to pay for what he calls “other advisers’ mistakes”.

He added: “A lot of it is down to people going into Ucis, schemes that collapse - typically property schemes - which those advisers say are bullet-proof, but they are not. For certain cohorts of investments, there should be a specific liability on the advisers who advise on these.”

Another adviser has seen a 25 per cent rise over the last year, but added he was “sick” of complaining about it and thus has learned to “just swallow it”. Fees and levies amount to 1.4 per cent of his annual turnover, he said.

Around a month ago, the FCA published its final rules on fees and levies for the next year, which confirmed financial advisers will pay around £6m in FCA fees, a reduction in the previous year due to a change in the way the core regulatory fee is calculated.

A fourth adviser spoken to by FTAdviser did report a slight fall in the FCA charge, however this is more than compensated by the rise in his FSCS levy, which he said amounted to 79 per cent of his total levy.

Overall his fees have gone up 30 per cent in the last year. Total fee and levies amount, plus PI insurance costs, equate to 5 per cent of the firm’s total turnover.

He said: “It is particularly irritating as the cause of the levy is basically unstable products. People are manufacturing these and then people are selling them.”

When asked whether the new FSCS funding model will cause fees to decrease, he said: “I’ll believe it when I see it”.

He added: “People say ‘why can’t we give cheap advice’, well guess why? I don’t want to sound too woe is me... this is still the best job in the world, but we need some balance.”

Apfa boss Chris Hannant previously said he was optimistic that in the long run advisers would avoid paying an interim levy and therefore that costs would be lowered in the long term.

Mr Hannant said: “Under this new approach, the FSCS is more likely to ‘over-levy’, removing the need for an interim levy next year and should mean some of the following year’s levy is paid in advance. All of which should, in the long term, smooth payments.”