Advice networks have claimed the Financial Conduct Authority's new £250 flat fee, to be paid by each of their appointed representatives, has come as a "shock" to the sector.
While the regulator's latest fees and levies consultation paper, published yesterday (April 20), detailed only a small rise in advisers' annual fees, it also proposed a periodic flat fee of £250 for each AR, which will see it raise an additional £10m of funding.
It has created a new fee block – A22 – for principal firms and their appointed representatives.
The FCA said principal firms will pay the periodic fee based on the number of ARs they have on the Financial Services Register on the first day of a fee-year, which begins April 1.
The move comes after it found “significant shortcomings in principal firms’ understanding of their regulatory responsibilities for their ARs”, and will help fund additional work in this sector.
The regulator said this included insufficient oversight of their ARs and inadequate controls over the regulated activities which they had responsibility over.
It stated: “We are increasingly seeing more examples of failings through our supervisory and enforcement work. The range of harms varies considerably - from mis-selling to fraud – but they often stem from principals’ failure to oversee their ARs appropriately.
“The new fee will help fund further work to address these harms in whichever sector they occur.”
The FCA also said yesterday that the amount advisers are expected to contribute towards the City watchdog is to rise by 1.5 per cent to £82.3m next year, while overall, the FCA’s budget is going up by 4.5 per cent to £616.5m.
Most advisers responded well, welcoming the fact it represented only a marginal increase, and one broadly in line with inflation.
But networks have been more critical, despite the relatively low level at which the new fee is set. Gemma Harle, managing director of Quilter Financial Planning, said: "The news of a brand new charge to be stomached by networks and their appointed representatives comes as a shock to the sector."
She said while it was important to ensure principals are held accountable for their ARs, these fees could have “significant ramifications” on good advice businesses who are already struggling under a steep regulatory bill.
Harle said: “At the moment it is hard to understand the justification for such a charge which will have a substantial impact on networks who support smaller AR practices.
"Adding a cost of £250 to each AR indiscriminately means that a large business, which may be undertaking riskier business will have the same additional cost as a small mortgage firm.
“We have yet to understand what the additional cost will deliver for good firms that cause little challenge for the regulator.”
Harle also said five weeks was not enough time to consult properly.
She added: “At a time when financial advice is more crucial than ever, this proposal and its ramifications needs to be carefully examined and supported by a full business case before implementation.”