Advisers have challenged the regulator’s increase in fees, questioning whether it is value for money for them.
In a consultation paper today (April 5), the Financial Conduct Authority proposed that larger IFA firms will see a 5.9 per cent increase in fee payments to the regulator.
The funding requirement for fee-block A.13, which includes IFAs among others, has increased by 8.9 per cent, from £86.8mn to £94.6mn, but the actual fee-rate that advisers will pay has increased by 5.9 per cent.
FTAdviser understands this is due to factors such as higher incomes being reported or the amount of firms within the sector.
Darren Cooke, chartered financial planner at Red Circle Financial Planning said: “At the point where they are telling advice firms we need to look at the value we provide to our clients under consumer duty, are we allowed to ask what value the FCA provides to anyone for the fees it currently charges let alone a 9 per cent increase?”
The regulator said in its fee proposal document that its overall AFR is estimated to go up by £53.3mn in 2023/24, an increase of 8.5 per cent from £630.9mn in 2022/23.
Tom Kean, director at Thameside Financial Planning, said: “When Bailey asks us all to be sensible and not raise prices to help reduce the rate of inflation, his ex-colleagues over at the FCA are busy ignoring him, like most other people do in fact.
“If I felt it was good value for money, and that they treated us fairly, it might not hurt as much; but this really stings I’m afraid.”
Elsewhere, Simon Harrington, head of public affairs at Pimfa said it accepts that the coming period will involve significant adjustment on the part of the regulator and that these will need to be funded.
"In designing a new rulebook as part of the FRF we remain hopeful that the FCA will conceive of a regulatory approach which is more proportionate and cost effective for firms," he said.
"It is only in this context that we can ascertain whether or not the proposed fee rises (which are significant) will represent value for money in the long term.”
Inflationary pressure
The FCA put the change in funding requirement down to the extensions to regulatory responsibility and exceptional projects.
The regulator said that smaller adviser firms will only pay the minimum fee which, for this year, the FCA is proposing to freeze at last year’s rate of £1,500.
Most of them affect all fee payers so their costs will be recovered proportionately across all fee-blocks.
The ongoing regulatory activities (Ora) was a total of £664.4mn and exceptional projects was £25.3mn.
Philip Milton, of Philip J Milton and Company, said: “I suppose it is ‘inflationary’ so to be expected but clearly the charge has not advanced in line with the markets upon which most firms’ revenues have rather greater reliance than inflation.”
Meanwhile, Tim Morris, IFA at Russell & Co Financial Advisers, said it was “a real kick in the teeth for advisers.”
He said: “We are told there's lots of work to reduce advice fees, yet they only go one way.”
“And I certainly haven't increased my client fees by 9 per cent and if I did, it would just add to the pile of cost pressures people are currently experiencing.
“Advisers are people and can be vulnerable too. No one is immune to the cost-of-living squeeze.”
An FCA spokesperson said: “We recognise the financial pressure some firms are under, which is why we are proposing a rise in fee below inflation and a freeze on minimum fees, which are the only fees paid by 17,000 of the smallest firms we regulate.”
FTAdviser understands that fees generally are going up because the FCA’s remit continues to expand and it is dealing with turbulent time in the markets which is requiring flexible resourcing.
sonia.rach@ft.com
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