Three months is all it took for the Financial Conduct Authority to shift its position on fee structures from one of ‘It’s too complicated to revise the levy calculation’, to ‘Let’s see what changes we can make’.
In June, Charles Randell, chairman of the FCA, said: “The Financial Services Compensation Scheme costs levy is already at an unacceptable level; and I am sorry to say that it is likely to increase, as some firms will fail during this crisis.”
Mr Randell warned changes to reduce the cost of regulation would require significant investment and take a number of years to implement.
Within a few weeks – during which the FCA came under fire for pushing through an eight-week consultation to reduce the maximum cap on redress it would have to pay as a result of regulatory failings, and MPs added their voices thanks to Financial Adviser’s letter-writing campaign – the tune has changed.
The FCA is now seeking industry views on how to make companies that do more harm pay more in the way of redress. In other words, the call for input on the retail investment market issued by the FCA in September is looking into the funding structure of the FSCS.
Back in June, the chairman of the FCA said the regulator would not revisit the funding structure of the FSCS. He also said the FCA would not put a stay on increases in its membership fees this year to reflect the difficult economic circumstances.
Now the FCA is considering how the financial lifeboat scheme might be funded and whether a ‘polluter pays’ model would work.
Of course, the powers that be will never acknowledge that the noise created in Westminster by Financial Adviser's and other bodies’ campaigns has forced the issue.
But given that ‘polluter pays’ has been touted since 2016, when advisers polled by AJ Bell voted overwhelmingly for such a basis to the funding structure, and it is only four years later that this is being considered, one has to ask whether this is all just pure coincidence, or whether the #KeepFeesFair campaign has had an effect.
Again, it was only in June the regulator said fees would have to rise. A lot can happen in three months, evidently.
So will we get ‘polluter pays’? A poll from Financial Adviser recently showed this was the most popular option for advisers.
And given that at a press conference last week, outgoing chief executive of the FCA Christopher Woolard said a product levy was not “back on the table” as part of its plans to manage rising FSCS costs, it may be that tougher enforcement of wrongdoers and earlier intervention along the investment journey might take some of the cost burden off the adviser's shoulder.
Still, dismissing a product levy is reminiscent of how, back in 2014, the former FCA chief executive Martin ‘Shoot First’ Wheatley said the phrase ‘regulatory dividend’ was banned from the regulator’s lexicon.