Speaking to FTAdviser, Sir Alan revealed he chose to table a motion to freeze FCA fees for two years after several IFAs in his constituency approached him about the impact of FCA fees on their business.
Sir Alan said: “I had a group of financial advisory companies within my constituency come to see me. They outlined the cost to individual investors that various charges had. These levies had been increasing over the last few years.
“I took the information away and looked at it, got them in to see me again and it was very clear there had been a huge surge in fees.”
He said protection for consumers was vital but not when it added such a significant sum to the cost of advice that investors with small sums of cash can no longer afford the help of an IFA.
When asked why he was pushing for a two year freeze on FCA fees, Sir Alan said he was being conservative as he actually believes fees should be frozen for the duration of a parliament.
He said: “I was going for a single parliament but the reason I went for two years is if you do two years what it means is (government are more willing to think) we will give it a trial.”
While two years was not an ideal period for a fee freeze for the industry, Sir Alan said “it will allow its introduction to be meaningful.”
Chris Hannant, director general of the Association of Professional Financial Advisers, said the trade body backed the motion and would encourage advisers to lobby their local MPs to get them to support it.
Sir Alan said: “This is just a first step. This needs to be done first - before the Financial Advice Market Review.”
So far the early day motion has been backed by Peter Bottomley, Conservative MP, Mark Durkan, Social Democratic and Labour Party MP, Margaret Ritchie, a Social Democratic and Labour Party MP and Jim Shannon, for the Democratic Unionist Party.
The early day motion currently notes that the recent changes to pension legislation have meant consumer access to clear and affordable financial advice has become increasingly more important.
It further noted that recent research by the Association of Professional Financial Advisers, demonstrated that on average an adviser firm spends 12 per cent of its revenue on regulation.
Apfa’s research found that, in 2013, smaller firms spent on average 12 per cent of their income on direct and indirect regulatory costs - 3 per cent on direct fees and levies and 9 per cent on indirect costs.
This meant that in total the sector spent an estimated £460m on regulation, with the average client paying approximately £170 per year towards the cost of Financial Conduct Authority rules and requirements.
In March Apfa launched an adviser-led survey to establish a ‘cost of regulation’ index for the sector.
Apfa says the index will allow the trade body to monitor the annual direct and indirect costs of regulation and compliance.
Apfa claims it will be used a benchmark against “which the [Financial Conduct Authority] can be held to account”.
The motion comes after HM Treasury and the FCA published an input paper on Monday (12 October) for the Financial Advice Market Review.
The paper acknowledged that it is no longer possible to advise certain clients and be profitable, with the FCA noting the impact of regulatory fees on the cost of providing advice today.
emma.hughes@ft.com
