The government’s review into advice is a clear indication that it understands current costs and unlimited liability is restricting innovation, the Personal Finance Society said, as it urged advisers to give their views to influence the “next phase of revolutionary change”.
The Financial Advice Market Review, announced by the Treasury and the Financial Conduct Authority earlier this month, is a “unique opportunity” for the advice profession to inform the regulators how change can better the public’s financial planning needs, the trade body said.
The review, which is currently gathering evidence, will examine the regulatory and other barriers firms face in giving advice and how to overcome them.
In early July, PFS chief executive Keith Richards, wrote to the chancellor to request a government-backed review in the wake of member reaction to the significant hikes in regulatory levies and the impact this has had on both the sector and consumers alike.
FTAdviser revealed that some advisers have seen their regulatory fees and levies increase by a whopping 400 per cent.
Mr Richards said: “As the review is government initiated, it represents a genuine opportunity for advisers to help shape the changes for the good of the public and profession alike.
“It is a clear indication the government recognises that the current cost and unlimited liability is impacting on all models of regulated advice and restricting the innovation of low cost entry solutions.”
He also claimed that there is “clear understanding” within the Treasury that spiraling regulatory costs are making it difficult for many existing firms to stay in business which, in turn, affects members of the public already under advice and will reduce capacity even further.
“It also acts as a deterrent to those contemplating entering the market.”
In calling for government investigation into the impact of regulatory cost and risk, including how future levies should be collected, Mr Richards argued the “increasing and unsustainable” regulatory burden is neither balanced, nor in the best interests of either the public or the industry that serves them.
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.
Mr Richards said: “The knock-on effect this has on consumers and their ability to access professional advice is an area of increasing concern.
“While regulation is in place to protect the public from poor outcomes, in its present form it can ironically restrict access to good outcomes and increase cost.
“A more balanced approach is essential, coupled with reasoned, realistic solutions from the sector for all regulated advice, not just low-cost simplified.”
The PFS has also requested a broad review of regulatory funding, suggesting that it is time to address an “outdated mechanism” that levies unfairly against a smaller number of contributors in the post-RDR landscape.
He said: “The current system is very opaque from a consumer perspective, with regulation, FSCS, Mas and Pension Wise all appearing to be free.
“We hope the review will give the public the transparency they deserve - consistent with RDR principles - rather than costs being bundled into adviser charging structures and making advice look disproportionately expensive.”
The Association of Professional Financial Advisers also called for a “fundamental rethink” of the current regulatory environment for advisers, particularly around liability, in reaction to the government’s review of the advice gap.
donia.o’loughlin@ft.com
