Fees  

FCA fees fuelling ‘regulatory tapeworm’ at core of advice sector

FCA fees fuelling ‘regulatory tapeworm’ at core of advice sector
Mykhailo Polenok/Dreamstime.com

Advisers have accused the Financial Conduct Authority of “failing” consumers and fuelling a “regulatory tapeworm” at the core of the advice sector following the publication of its proposed fee hike for advisers.

The City watchdog said this morning advisers could face a 5.2 per cent annual fee increase to £86.5mn for the next year, putting a portion of its enlarged funding requirements - which will grow by £26.4mn in 2022/23 - down to cryptoasset supervision.

The regulator suggested that by next year, the number of advice firms under its watch will likely have fallen by 400, from 12,301 to 11,901.

Alan Smith, chief executive of boutique chartered financial planning firm Capital Asset Management, said the repeating increases were having a ripple effect on clients.

“These continual regulatory fee increases have meant that firms like ours have had to increase our fees to clients - thereby reducing the number of consumers who can access independent advice,” Smith said.

“It therefore seems that the regulator is failing in its core responsibility – to provide a suitable framework for consumers to access financial advice with confidence.”

Last year, advisers saw the amount they contribute towards the City watchdog rise by 1.5 per cent to just over £82m.

In September, the FCA published its consumer investment strategy. In it, the regulator said its aim was to give consumers the confidence to invest by establishing an “affordable” advice market.

Derek Bradley, chief executive of Panacea Advisers, agreed with Smith, questioning why fees should go up for advice firms if there are fewer of them to regulate.

He added: “This is becoming the industry eaten by a regulatory type of tapeworm. Advisers become hosts to these regulatory tapeworms as a result of being involved in a financial services business. Host symptoms can include weakness, hunger or loss of appetite, fatigue and weight loss. 

“For many advisers hearing this news some or all these symptoms will no doubt be ‘presenting’ today.”

Add to that the ongoing impact of increasing professional indemnity premiums, Bradley said, “ever increasing” Financial Services Compensation Scheme calls having to be paid by fewer firms “all means that the worm continues to grow”.

In its Business Strategy paper, also published today (April 7), the FCA warned its clampdown on bad firms may see FSCS redress payments increase even further in the short-term.

Part of the regulator’s plan is to hire 80 new employees to crack down on rogue firms.

‘Underwhelmed’ by FCA progress

But some advisers are “underwhelmed” by the regulator’s progress despite it hiring 95 additional people to deal with authorisations.

“I’m underwhelmed by what I see,” said Victor Sacks, a Cambridgeshire-based IFA. “The FCA wants good guys to do more, but I don’t see it locking jaws and honing in on many phoenix firms. Where’s the due diligence?”