One adviser has seen his total regulatory fees and levies bill jump by an astounding 400 per cent, excluding March’s interim levy, while all other advisers FTAdviser spoke to said bills had increased by at least 50 per cent.
This week advisers received their regulatory fees and levies for 2015 to 2016, which includes a periodic fee to the Financial Conduct Authority, a Money Advice Service fee, a Financial Services Compensation Scheme levy, a Financial Ombudsman Service levy and the pension guidance service levy.
An adviser, who declined to be named, said that his fees have increased by almost 400 per cent, while his turnover went up by around 25 per cent.
“This doesn’t even take into account the interim levy from a few months ago.
“My big beef with this invoice in particular is that there is no transparency in the calculation. How can my fees go up so much in relation to my turnover, when compared to other firms? It must be something to do with my business mix, but I can’t easily tell.
“The bill is big, but at least if I understood it, perhaps it would be easier to bear.
“Something has to be done about this. The bad is driving out the good. I accept that the FSCS has to be paid for, but there’s got to be a better way.”
He added that he would be in favour of a product levy spread across all products.
“There would need to some way of extending that to unregulated products, because so often it is they which cause the problems. Maybe firms advising on Ucis or similar should have to pay a special levy.
“The way it currently works (or doesn’t work), is that good advisers end up paying after the fact for bad advisers.
“Why can’t there be some sort of pre-funding? If a firm is engaged in advising on more risky areas, this could be picked up in the RMAR return - it would be easy to add a question about unregulated products, for example - and a firm’s FSCS levy increased accordingly.”
Another adviser, who declined to be named, has seen a 135 per cent increase on last year’s bill, which was around £6,300.
His bill, seen by FTAdviser, is now £14,846, of which £12,403 is for the FSCS.
The main driver of advisers’ bills is, unsurprisingly, the FSCS levy.
In April, the FSCS revealed that pension and life intermediaries would be stung with a maximum £100m levy, a 75 per cent increase than that which was expected when the FSCS gave its levy indication earlier this year and three times last year’s bill.
This is driven by unregulated investments wrapped into self-invested personal pensions.
The adviser described the bill increase as “shocking”.
He said: “This equates to around 2.5 per cent of our gross profits. When you include our PI costs which are around £12,000, this bumps this up to 5 per cent.
“This is just for regulatory fees and does not include phones, rents, back office systems, software providers, and we have to try to make a profit too. Plus, they can slap us with another bill, such as interim levies, later on in the financial year.”
He added that this cost will have to be passed on to clients.
“Fees are totally out of control. There is an air of arrogance from the regulator about it all. What should happen is a levy on every product policy.”
Leslie Sharpe, managing director at Clairville York Financial Advisers, told FTAdviser, his total bill is £20,711, an 80 per cent jump on last year.
The FSCS levy has jumped 87 per cent in the last year to around £17,297.
Mr Sharpe told FTAdviser: “It is hugely frustrating when you are working hard to do the best for your clients and someone goes and screws all that up for you as ultimately the consumers have to pay for it. I would like to see the regulator be more effective in dealing with this. Should we pay for unregulated investments?
“A product levy would be a far fairer way of distributing costs, then those clients who are well looked after by a complaint advisers are not having to pay for the mistakes of others.”
Phil Billingham, compliance and operations director at Perceptive Planning, told FTAdviser that his firm’s total bill is up 50 per cent on last year and amounts to 3.5 per cent of turnover.
He added that the main effect of the bill increase is that advisers will have to constrain their growth.
“Taken with the increase in capital adequacy, firms will have to be more cautious at a time when firms could be expanding more. Frankly I would rather employ somebody else than pay this, which I think other advisers would also rather do.”
Mr Billingham added that although it would still be irritating, it would be easier to stomach if the bill was simply for IFAs who were unlucky or who failed through no fault of their own.
“In my view it is immoral that the FCA has said that many product providers are now intermediaries. This is drivel and unethical. It is just easier for them to bully (us) and put this on the small IFA. They are reluctant to put a levy on product providers.”
“We, as a firm, will absorb the costs but this makes us more careful about the clients we take on.”
Mr Billingham believes a product levy is the fairest way to deal with this issue.
He said: “A 1 per cent levy wouldn’t make a jot of difference to providers but it would create a fair compensation pot and would relieve the burden that small firms are under.”
donia.o’loughlin@ft.com
