The Association of Professional Financial Advisers has called for a freeze to the Financial Conduct Authority’s budget for two years and additionally demanded a reduction in adviser levy rates to fund the Pension Wise guidance service.
The industry body published its response to the FCA’s fees and levies consultation paper, which proposed an increase in fees for advisers of 10.2 per cent in 2015/16.
Chris Hannant, director general of Apfa, argued that year-on-year fee increases are unsustainable for the profession, calling on the regulator to find sufficient efficiencies to effectively undertake its responsibilities.
“We recognise that advisers should contribute towards the FCA’s and other regulatory bodies’ costs, however the ever increasing cost of regulation is having an adverse impact on the financial adviser sector.”
As revealed in January, advisers will pay £4.2m towards the pension freedoms ‘guidance guarantee’ levy, with the overall initial industry levy for 2015/16 hitting £35m. Other groups will pay £7.7m.
In November, the Financial Conduct Authority announced that advisers will only pay 12 per cent of the total cost, while deposit acceptors, life insurers, portfolio managers, and managers of collective investment schemes or pension schemes will pay 22 per cent each.
While Apfa welcomed the regulator’s decision to halve advisers’ contribution, the trade body believes the regulator should go further and reduce the share allocated to advisers by 75 per cent.
Mr Hannant based this on “early experience” of the reforms have shown that advisers have not seen a surge in demand for their service given these changes and the introduction of Pension Wise.
The response read: “We suggest that the share allocated to A13 should be reduced by 75 per cent i.e. 5 per cent of the cost should be allocated to A13.
“In any event, in applying the proposed 50 per cent reduction, we would suggest that this would result in A13 being allocated 10 per cent of the costs (20 per cent reduced by 50 per cent) rather than 12 per cent, with the remaining 90 per cent allocated evenly across the other four fee blocks.”
Apfa detailed why advisers are unlikely to benefit from Pension Wise, noting that there is an increasing trend for people making their own investment and pension decisions, while the vast majority of pension pots are below £50,000 and therefore paying for full advice is unlikely to be economic for most consumers.
Also, in terms of consumer credit, advisers continue to pay these fees even though their activity in the market is negligible, yet advisers only get the permission because of the lack of clarity on the regulatory boundary.
“Advisers also do not offer credit or provide debt counselling as a service, so we therefore believe that the FCA should not impose the annual consumer credit fee on advisers, and at the very least the FCA’s notional fee should be reduced from £300 to between £25 and £50,” argued Apfa.
With the Financial Ombudsman Service, Apfa’s concerns are similar to those with the FCA, and given advisers already contribute to Fos’ costs by virtue of their other permissions and that their revenue from this area will be close to zero, it argued that advisers should not be expected to pay any further Fos fees in respect of consumer credit activities.
The consultation response outlined similar concerns with the Money Advice Service, arguing that for the same reasons, advisers should not be expected to pay any further fees to Mas in respect of consumer credit activities.
peter.walker@ft.com
