The Financial Conduct Authority has confirmed its planned 10.2 per cent fee hike for advisers for 2015 to 2016, defending the methods it uses to calculate their contribution to its annual costs as “fair and proportionate”.
A policy statement published today (23 June) detailed that firms in the A13 block - those firms who do not hold client money - will pay £74.9m in 2015 to 2016, up from £68m in 2014 to 2015.
The regulator stated that this group hosts a diverse range of firms, including securities dealers and energy market brokers, therefore suggesting that advisers’ contributions can be overstated.
It estimated that fewer than 3,000 advisory firms pay more than the minimum fee, contributing a total of £7.2m, less than 10 per cent of the total levied on the A13 block and around 1.5 per cent of its total annual costs for the year ahead.
The FCA pointed out that this method means small firms pay the minimum fee only, while the remainder pay fees proportionate to their income compared with their peers.
However, this minimum fee will increase to £1,084 from £1,000 - the first such increase since 2010.
New fee proposals were outlined at the end of March and have been under consultation since then, with responses received from an adviser trade body, a network and 25 advice firms arguing against the increase.
They argued that the cost of advice has risen and access is a challenge for many consumers, also noting that the calculations should take into account costs like professional indemnity insurance and other regulatory fees.
The policy document acknowledged that fees are a cost to financial advisers and that this may be passed on to consumers of their services.
“However, we believe that the funding those fees provide enable us to meet our objectives, including protecting consumers, resulting in a benefit for consumers.”
The regulator added that fees are set to recover the funding of resources needed to achieve statutory objectives as set out in the annual business plan.
“To that extent they cannot be reduced to take account of the fees and levies that firms pay to other organisations. If they did then we would not be raising the funding we believe we need to meet our statutory objectives.”
All 70 respondents to the consultation raised concerns over the 8 per cent increase in the FCA’s annual funding requirement - up to £481.6m from £446.4m in 2014 to 2015 - which it put down to higher staff and technology costs.
However, several responses argued that the increase is in excess of inflation and stands in “stark contrast” to cost cutting in other government departments and across the private sector.
Association of Professional Financial Advisers’ director general Chris Hannant stated that the FCA should be able to make efficiencies to ensure that its fees and levies do not increase.
He said: “Therefore, we call for the FCA to implement a real term budget freeze for three years.
“We will continue to challenge the FCA’s need for such increases and we will continue to press for all the regulatory bodies to be more cost effective and to commit to not increasing their costs.”