The news that the FCA is threatening to increase the application fees to new applicants by between 50 per cent and 100 per cent is both disgraceful and against the best interests of consumers.
The mantra of the FCA is, rightly, focussed on the importance of improving consumer outcomes.
Regrettably, this unjustified hike in the costs of new applications takes the FCA completely in the opposite direction and will certainly not help towards improved outcomes for consumers.
All the research demonstrates that consumers who have the benefit of independent financial advice enjoy better outcomes than those who do not. It is estimated that consumers who have used a financial adviser for more than ten years are between 25 per cent and 40 per cent better off in retirement.
Consumers who have the benefit of independent financial advice enjoy better outcomes than those who do notIn addition, their families have invariably been better protected from life’s catastrophes, than those who have not had the benefit of financial advice.
The resulting savings to the government in social services and benefit costs are incalculable.
Sound financial advice, in turn, results in clients enjoying significantly longer and more productive retirements and happier lives. What could be a better outcome for both the government and consumers?
Frankly, rather than creating barriers to entry by putting up the fees for new applicants, the FCA ought to be trying to work out how it can encourage new blood into the profession.
Reducing costs to new applicants, rather than increasing them, would be a very constructive start, and one which we could all applaud.
I appreciate that the FCA’s authorisations department costs money to run; however it is fundamentally wrong to try to recover its cost directly from the applicants.
Instead, the FCA should consider the amount of income the average adviser will generate for providers during their career.
The reality is an individual adviser is likely to produce in excess of £20m in investments from which, over time, the providers will earn hundreds of thousands of pounds. It is a matter of record that upwards of 80 per cent of investment placed with providers is intermediated.
Not only that, but most of the institutions are benefiting from what to them is ‘risk-free’ business, due to almost all the risk being borne by the intermediary plus, of course, the advice firms have all the costs of PII and the FSCS.
This gives the providers a direct vested interest in both the cost of the application process and the success of IFAs.
The fact is, that it is high time the FCA stopped milking IFAs and acknowledged the fantastic contribution they make to the well-being of their clients, and to the health and profitability of the financial sector as a whole.
Small and medium-sized firms, particularly where the principals are the advisers, are renowned for the quality of their advice, coupled with incredibly low instances of upheld complaints.
For me, the most frustrating aspect of all of this is that, despite all the evidence of the benefits that independent financial advice delivers for consumers, particularly from smaller and medium-sized practices, the regulators seem obsessed with creating hurdles.
If the FCA really is serious about improving consumer outcomes, it should focus on encouraging the IFA sector to grow, so that we can deliver improved consumer outcomes to more clients.
Ken Davy is chairman of SimplyBiz Group
