New research carried out by the Association of Professional Financial Advisers (Apfa) has shown that the cost of regulation works out at roughly £170 per client per year.
The cost of regulation works out at roughly £170 per client per year, according to research by the Association of Professional Financial Advisers (Apfa).
The research - carried out among 74 firms between March and May - found the overall annual cost of regulation to the financial advice industry in general is £460m.
For firms with an annual income of less than £1m - 90 per cent of the companies surveyed - the cost of regulation eats up 12 per cent of their income, three quarters of which is indirect costs. These comprise necessary expenses such as internal compliance or regulatory reporting.
Companies with an annual income less than £100,000 have an average total regulatory outlay of 20 per cent of their income. This drops to 8 per cent for firms with incomes of between £500,000 and £1m.
The goal of the research was to look at how much advisers spend on direct regulatory fees to the FCA and FOS, and on indirect costs.
Apfa concluded the regulator must focus more on ways to reduce the burden on firms, rather than increasing it. Sole trader Harry Katz believes many smaller firms like his are including too many costs when filing their regulatory returns and people are making “a lot of fuss about very little.”
“Regulatory costs are very irritating and it’s a tax on doing business: but the costs are there. I reckon my regulatory costs are around 6 per cent.”
“It depends what you want to include in your return,” he added. “Does anyone really want to maintain that paying for a seminar is a regulatory cost rather than an education cost?”