RegulationDec 3 2015

Apfa tells IFAs to flag £160 regulatory cost on your bill

Search supported by
Apfa tells IFAs to flag £160 regulatory cost on your bill

The Association of Professional Financial Advisers has urged advisers to make it clear to clients how much of their bill covers regulatory costs.

Today (3 December) the body published its annual Cost of Regulation report, which revealed that on average, small to mid-sized firms spend 12 per cent of their income on direct and indirect regulatory costs.

Of this, Apfa said 3 per cent is spent on direct fees and levies, and 9 per cent on indirect costs including compliance, reporting and managing time taken to deal with regulation.

These are the same proportions as the previous year.

According to the association, this means that the average client is paying about £160 each year towards the cost of regulation.

Chris Hannant, Apfa’s director general, said: “At a time of heightened policymaker concern about what measures are required to broaden consumer access to professional financial help, it is vital that radical steps are taken to reduce costs and make advice more affordable to those that need it.”

He said Apfa will continue to urge politicians and regulators to use the Financial Advice Market Review as an opportunity for reform.

“Advisers can be more proactive and transparent in highlighting to their clients how much of their bill is simply to cover regulatory costs.”

Alongside the report, the body also today published a cost disclosure template for advisers to use in their communications with clients.

Mr Hannant said advisers can use this template to “raise consumer awareness of the impact of regulatory fees and levies, as well as the expenditure firms have to undertake to keep up with continually-changing regulation”.

Keith Churchouse, director of Guildford-based Chapters Financial, said: “I do think the public should be aware of the regulatory burden financial advisers face. However, while they should be aware of it, whether they would be interested in it is a different matter.

“I think the public knowing about the regulatory costs might have a detrimental effect on advice firms because people might think if it costs that much to regulate the business then it must be bad.”

He suggested some advice firms should be given a discount on regulatory fees and levies because “it’s the good guys that are subsidising the bad guys”.

“Currently it’s a self-defeating situation and it will drive some good advisers out of business.”

Mr Churchouse also pointed out that, while the regulatory cost to his business is only about 7 per cent of the overall income, the management time spent dealing with the procedures is a lot higher.

“It’s the costs that don’t appear on the balance sheet that I think it probably one of the most important points here.