Regulation 

Regulator defends regulatory fee hike

In a 33-page policy statement, the regulator defended the increased levy, saying it was necessary to implement its “strategic priorities”.

Responding to an industry-wide consultation on the issue, it acknowledged that the fines coincided with “difficult trading conditions” for the industry.

Gill Cardy, founder of the IFA Centre, said the timing of the fee hike was poor, despite the fact that 40 per cent of firms will only pay the minimum fee level.

She said: “Further increases in regulatory costs, at a time when advisers are already dealing with a post-RDR regime, proposed changes to capital adequacy, and uncertainty around funding for the Financial Services Compensation Scheme, will not be welcomed.

“The FCA should have acknowledged that the advisory sector does not traditionally create the kind of risks that should incur a big regulatory cost. Advisers are generally low risk and low impact in this regard, and increasing fees goes against the principle that the RDR was meant to reduce any regulatory hazards.”

Ten trade bodies and 14 firms have written to the FCA to complain about the 15 per cent rise in regulatory costs, arguing that it was disproportionate and damaging to business in the current trading climate.

Concerns were also raised about the regulator’s recruitment of more front-line staff and higher spending on IT.

The policy statement said: “The increase in front-line staff reflects the need to embed our judgement-based, forward-looking and risk-focused supervision approach. The development of this approach, although started the year ahead of legal cutover, is not fully embedded. We also have to deliver our new market integrity, consumer protection and competition objectives.”

It went on to say that the previous regulator, the FSA, had promised “significant investment” in technology that had to be upheld. The current regulatory authority expects to spend £85.7m in IT and associated costs in 2013/14.

Key fee changes:

- Overall fees rise by 15 per cent (or £86.5m).

- Adviser firm charges in A13 fee block go up by 13 per cent.

- Adviser firms make up 9.1 per cent of the regulator’s annual funding requirement.

Reaction round-up

Derek Bradley, founder of Panacea Adviser, said the decision could contravene the regulator’s 2007 code of conduct when it comes to keeping costs in check. He said: “There are fewer firms having to pay more post-RDR, and the regulator should really look at whether it’s keeping within the 2007 code. It’s clear that regulators should take a considered and careful approach when setting its fees.”

Simon Mansell, director of Worcester-based advisory firm Temple Bar, said: “Advisers will not be surprised by this and that is a sad reflection of our relationship with the regulator – it is a one-way street. The advisory community is shrinking while the regulator expands, but who really believes the next mis-selling scandal will be picked up the FCA?”

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