It’s a subject that has drawn the ire of advisers for several years, but particularly since the Retail Distribution Review changes and the birfurcation of the Financial Services Authority, just four months later.
Your fees - and those for the industry as a whole - are spiralling seemingly out of control. There have been double-digit rises over the past few years and, following the dissolution of the FSA and the move to the ‘twin peaks’ regime, a further hike was announced.
The Financial Conduct Authority revealed the total annual cost of funding the ‘twin peaks’ regulatory system that also includes the Prudential Regulation Authority would be £646.3m, with £432.1m of this relating to the FCA and £214.2m to the PRA.
The combined cost is 15 per cent more than the regulatory costs for 2012/2013, the last year of operation for the FSA.
Given the drop in advisers in the lead up the RDR, this is insidious. It is doubly frustrating given the government’s drive to cut regulatory costs; the financial services regulators were conspicuously excluded from this cost-cutting imperative.
Now, finally, there will be some official scrutiny. The National Audit Office has announced an investigation into the ‘twin peaks’ regulatory system, seeking to assess how cost-effective the new regulators are to regulated firms and consumers.
The study will apparently consider the impact of the changes, both in terms of the additional costs of the regulators and, where possible, through estimates of the additional costs and benefits to regulated firms and consumers.
It is encouraging that the NAO is not simply looking at consumer impact, which can be misleading.
According to an Association of Professional Financial Advisers study published earlier this week, in the advisory sector it is firms picking up the tab, with their average hourly rate of £156 remaining unchanged in spite of the fee jump.
That is obviously untenable. And even if it means consumers are not seeing rising costs, if firms are eventually pushed out of business this will ultimately be detrimental and will reduce choice and access to services.
But the NAO is not just looking at costs. It will also examine the new regulatory framework and approach.
The body said it will provide an early assessment on whether regulation is likely to be delivered in a “targeted, proportionate, consistent and transparent way”, and whether the bodies are effectively working together “where this is necessary or beneficial”.
It will also review the performance measurement system used by the new regulators.
This, again, is welcome. A lack of proper measurements of success or otherwise for the regulators was a key concern when they were inaugurated back in April.
Overall then, it is surely to be applauded that a review is finally taking place. Don’t expect things to change too soon, though: it won’t be reporting back until “early 2014”.