RegulationJul 4 2014

FCA cuts fee bill for advisers

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In its final rules on fees and levies, the regulator confirmed advisers will pay a total of £6m in FCA fees in 2014 to 2015, less than they paid last year due to a change in how fees are calculated.

Earlier this year the regulator published plans to enlarge fee-block A13 to include both firms that hold client money and those that don’t.

The resulting fee block must contribute 15 per cent (£68m) of the regulator’s annual funding requirement however, this is not all recovered from financial advisers.

The FCA said: “We estimate that the amount recovered from financial advisers to be £6m (8.5 per cent) and the number of financial advisers to be 55 per cent of the total firms that pay fees in A13.”

The policy statement also said while the FCA highlighted creating a new fee-block will always lead to winners and losers in the short term, “this does not mean that some firms have been historically overcharged any more than others have been undercharged”.

The statement said: “We are recovering the same amount of money from investment intermediaries as previously.

“Creating the new A21 fee-block enabled us to pool large and small firms together into a revised A13 fee-block and this has the effect of reducing the blended fee-rate per £100,000 of income.”

The regulator also confirmed minimum fees will remain on hold at £1,000 for the fifth year in a row but will be reviewed in October when it plans to consult on its methodology for calculating minimum fees in response to concerns some larger firms were subsidising smaller firms.

Overall, the regulator’s annual funding requirement will increase 3.3 per cent on 2013 to 2014 to £446.4m.

The policy statement said: “The main reason for the increase is that we have not been able to return as much under-spend to fee-payers as last year when we returned £19.5m in 2013 to 2014 but a reduced £10m in 2014 to 2015.

“Excluding the impact of the under-spend returned, the underlying increase in the AFR is 1 per cent.”

The policy statement also acknowledged “a trade body representing mortgage intermediaries” had argued its members’ fees were disproportionately high.

The FCA policy statement said: “We acknowledge that fees have gone up over a period when the number of firms have fallen but not to the same degree as indicated in the response.

“In our 2014 to 2015 business plan, we flagged that during this year we will implement the mortgage market review, including significant changes for intermediaries.

“We continue to believe that 3.2 per cent of our 2014 to 2015 AFR is a reasonable reflection of how we plan to allocate our resources to the regulated activities covered by the A18 fee-block in order to meet our statutory objectives, in particular, to secure an appropriate degree of protection for consumers in this market.”