Financial adviser regulatory fees must change to a percentage of turnover to protect the future of the advice industry, a chief executive has warned.
Derek Bradley, chief executive of adviser forum Panacea Adviser, said he had been in frequent communication with the FCA over making the fee structure simple and straightforward, but claimed the regulator had seemingly failed to grasp the crux of his suggestion.
Mr Bradley wrote to Andrew Bailey, chief executive of the FCA, proposing creating a flat levy of 0.5 per cent of turnover for all firms, rather than the often "complex" calculations currently employed by the FCA.
He claimed such a flat percentage would help provide clearer projections for firms so owners would not fear having to end up out of pocket, while making sure that "polluters" do not end up putting such a strain on finances.
Yet Mr Bradley told FTAdviser in all his communications, senior people at the FCA had kindly taken the time to engage with him, including Mr Bailey, but failed to answer the questions he asked, while answering questions he did not ask.
Moreover, he claimed: "Nobody [at the regulator] seems to have grasped the idea of a flat percentage as I have proposed. I wonder if they wish they had thought of this sooner and so this is why they won't do it."
In emails sent to Mr Bailey, seen by FTAdviser, Mr Bradley wrote: "Their reply, on your behalf I assume, addresses a number of questions in some detail, but they answered questions that I did not ask.
"The reply avoids the crux of the matter, which is, essentially, if fees were levied based on a 0.5 per cent of turnover from all firms, would this produce sufficient revenue to cover FCA, Financial Services Compensation Scheme and Financial Ombudsman Service fees for all firms along with compensation, thus doing away with the need for professional indemnity cover?
"If not, what percentage of turnover, based on the latest regulatory year would [cover the fees]?"
According to Mr Bradley's estimates, based on 2017's figures this could be in the region of £1.1bn.
He added: "I appreciate that you may have bigger fish to fry but it would be good to know what percentage of turnover would cover all the costs?"
However, the FCA has stated it does not collect turnover data for firms for the purposes of fees. According to the FCA, firms are required to report ‘income’ in relation to certain regulated activity groups (fee-blocks) but not all, and the definition of 'income' used by the regulator for fees purposes is not the same as 'turnover'.
While Mr Bradley said he was grateful for the time various people at the FCA had taken to consider his emails and to come back to him with responses, he said he was adamant that a simple percentage solution would be the best one.