Financial Conduct Authority  

Industry welcomes FCA fee concessions for small firms

Industry welcomes FCA fee concessions for small firms

The industry has welcomed concessions proposed by the Financial Conduct Authority for smaller advice firms when paying regulatory fees in light of the coronavirus pandemic.

But concerns have been raised that the regulator's own fees are not the real problem faced by advisers, and more attention should instead be paid to the cost of the Financial Services Compensation Scheme and professional indemnity insurance. 

In proposals published this morning (April 7) the regulator announced the A13 fee block, which includes advisers, was set to collectively pay £80.7m towards its running costs in the 2020/21 year. 

The fees are a 1.6 per cent increase on last year's £79.4m bill, but the proposals were accompanied by a number of concessions for small and medium sized advice firms.

These included a fee freeze for 71 per cent of advice firms who currently pay minimum fees and a deadline extension in which to pay the bill, from 30 days to 90 days. 

This means nine out of 10 firms will have until the end of 2020 to pay their fees and levies, but larger firms are expected to pay under the usual payment terms.

Keith Richards, chief executive of the Personal Finance Society, welcomed the concessions in light of the current economic and social climate. 

Mr Richards said: "Given the impact of Covid-19, it is important that the FCA continues to recognise the financial pressure being placed on advice firms and the proposed freezing of minimum fees for many small firms as well as limiting an increase of the overall levy by 1.6 per cent for the A13 advisory arrangers, dealers or brokers group."

But Mr Richards warned the impact of the pandemic would also see compensation paid by the industry to consumers increase, which would place an "additional burden" on advisers via the FSCS and ombudsman. 

He added: "The current method of funding consumer compensation is unsustainable and we are again calling for government intervention for a complete overhaul.

"To achieve this, we must remove the volatility and uncertainty around the availability of professional indemnity insurance and the FSCS levy."

Martin Bamford, director of client education at adviser Informed Choice, said: "In the grand scheme of things, FCA fees are fairly insignificant for most firms. It's the cost of FSCS levies and professional indemnity insurance which are the real killers.

"I'm sure that most advisers would welcome moderately higher FCA fees if these were well spent on preventing future compensation costs, subsequently bringing down our biggest regulatory expenses."

Mr Bamford said the deadline extension for paying this year's fees also had limited benefit, with "any firm unable to pay their fees within 30 days just as likely to fail to pay in 90 days". 

Ian Cornwall, director of regulation at adviser trade body Pimfa, said the regulator only consults on the management costs of the FSCS and not its level of compensation - which places the real pressure on advisers.