Simplybiz has called on the Financial Conduct Authority to introduce the sort of ‘regulatory dividend’ which has been the subject of lobbying since the RDR, for the majority of small and medium-sized advisers worst hit by recent levy hikes.
In its response to the regulator’s fees proposals for this financial year, Simplybiz noted previous work related to the Treating Customers Fairly initiative found only limited non-compliance and no systemic issues after visits to virtually every directly regulated SME advice firm.
“Much has been said in the past of a promised regulatory dividend,” read the response. “We believe it is time for this regulator dividend to be reflected in the fees of small and medium sized firms.”
A similar proposal was put forward by the Association of Professional Financial Advisers in 2013 in the wake of the Retail Distribution Review, to reflect growing professionalism. The trade body renewed its call this year.
As previously reported, advisers are to pay an extra £6.9m in fees, an increase of more than 10 per cent, making the fee block the hardest hit in terms of regulatory levies rise this year.
Giving its comments on the proposed minimum fees and variable periodic fee rates for authorised firms, Simplybiz expressed concern that the increase in regulatory costs for personal investment firms is again considerably above the rate of inflation.
“This is particularly an issue for small and medium sized firms where the costs of regulation are a significant portion of their overall costs and where an increase in the regulatory burden is keenly felt,” the response read.
The response stated the increase can only result in rising client fees, with the end consumer seeing no perceived value or added protection.
Simplybiz also stated that the issue of a product levy to fund the Financial Services Compensation Scheme should be revisited. Advisers were recently hit with a dramatic increase in compensation scheme levies, largely related to unregulated investments in self-invested pensions.
“Such a levy would remove much of the inherent unfairness of the present system and be far less costly to administrate.”
Tackling the proposed consumer credit fees for the FCA, Financial Ombudsman Service and Money Advice Service for 2015/16, the firm explained that the majority of personal investment firms carry out consumer credit activities on an incidental basis.
It added the activities of consumer credit are often not separately charged for as they are not carried out ‘by way of business’, but as they are connected to other charged for regulated activities it is difficult for firms to claim an exemption.
This means firms must hold dual permissions when conducting investment activities to ensure they satisfy their regulatory obligations.
“There should be recognition of this factor by the FCA now that it falls under one regulatory body,” stated Simplybiz. “Disappointingly, the cost to firms has actually increased compared to when this was paid separately to the OFT.”
In response to the pensions guidance levy, Simplybiz suggested that the FCA undertake the proposed data review later in the year, to enable an assessment of the benefit to the intermediary sector. It said if it proves that the benefit is lower than the allocation, this should be reduced accordingly.
Advisers are being asked to pay 12 per cent of the costs of Pension Wise, which will be funded through £35m in levies and top-up Treasury funding to a first-year budget of £55m. Firms in other FCA-regulated pension sectors are paying around double this amount.
Commenting on the proposed Mas levy rates, Simplybiz commented that in the interests of simplicity and cost savings, given that the service has no involvement in the delivery of Pensions Wise, “we believe that Mas should be abolished”.
peter.walker@ft.com
