Regulation  

Fos complaints should dictate FCA fees: Zurich

Regulatory fees within the financial services sector should be related to upheld complaints at the Financial Ombudsman Scheme, a regulatory expert has said.

Matthew Connell, principal of government and industry affairs for global life at Zurich, told FTAdviser this could be one measure of ensuring firms who take on lots of risk end up paying out the most for regulatory fees, following the news adviser fees to the Financial Conduct Authority are increasing 13 per cent.

Mr Connell believes regulated firms should have risk-related fees, where they could have some kind of rebate on their fees if they are deemed a low risk firm.

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He also cited the regulator could conduct a risk assessment per firm, but warned although this would probably be the more accurate way of conducting risk, it would be far more expensive.

Mr Connell said: “The problem to do the risk assessment is they [the regulator] would have to invest a certain amount of money to do it firm by firm and then the other issue is if they classify that firm as low risk and charge them a lower fee and then something goes wrong, then they’ve got the embarrassment of saying they were wrong.

“Sectors could have fees linked to things like the levels of upheld Ombudsman complaints, then fees would go up more for the higher risk firms than the lower risk.

“The risk assessment of firms would be the most thorough way of doing it then the complaints for the Fos as that is not perfect.

“Newer firms would obviously have less complaints than those who have been around for some time. Certainly it is difficult to do the risk assessment, and this is one less labour intensive, slightly cruder way of doing it.”

He added at one point there was a lot of industry talk regarding regulatory dividends, which he agrees would be an easier way of setting regulatory fees.

The issue of a regulatory dividend was on the agenda in the early days of the RDR.

In November 2008, the Association of IFAs, now the Association of Professional Financial Advisers, urged the now defunct Financial Services Authority to consider regulatory dividends to reward those businesses which are well run and well capitalised.

Mr Connell added although adviser firms are seeing higher fees, they are not necessarily seeing more contact with the FCA as its conduct of business focus in on “things that have gone wrong and the reasons why they have gone wrong”, citing payment protection insurance as an example.

He said: “If there was some big problem with the adviser sector and then they saw higher fees on the back of it, it wouldn’t be so much of an issue but it is probably more the other sectors that have had problems.”