As IFAs' letters started to reach constituency MPs as part of Financial Adviser's Keep Fees Fair campaign, many have taken direct action on behalf of their adviser constituents to press for a fairer funding structure.
Labour MP Emma Hardy, shadow minister for FE and Universities and MP for Hull West and Hessle, received a letter from Kevin Ferriby, managing director of Informed Financial Planning.
She wrote in turn to Jesse Norman MP, financial secretary to the Treasury, to raise the concerns Mr Ferriby outlined in one of his Keep Fees Fair letters that he sent out to local constituency MPs.
Her letter, seen by Financial Adviser, discussed the serious impact that exponential hikes in professional indemnity insurance and continually rising regulatory fees and Financial Services Compensation Scheme levies are having on advisers.
She raised concerns that the disproportionate effect of fees is having not just on advisers but on the communities they serve – and urged the Treasury to review the funding structure of the Financial Conduct Authority to prevent a worsening of the advice gap.
Ms Hardy stated: "Good, affordable financial advice has never been needed more. I would urge the government to prioritise a review of the escalating costs to the IFA sector and the role that the FCA and the Financial Ombudsman has played in arriving at what, for many firms, is becoming an unsustainable financial burden."
Fellow Labour MP Karl Turner, for Hull East, and shadow minister for Legal Aid, also responded to a Keep Fees Fair letter from Mr Ferriby stating he would be writing to government ministers to raise these concerns.
Mr Ferriby commented: "Like many IFAs, I have written to our local MPs following the latest, unpalatable increase in regulatory costs. I understand that many people are disappointed with the lack of action from their MPs.
"My experience has been somewhat different in that Mr Turner (MP for the constituency where I live) has promised to write to government ministers to raise our concerns and Ms Hardy (MP for the constituency where the office is) has already written to the financial secretary to the Treasury."
The office of Stephen Hammond, MP for Wimbledon, has also responded to a copy letter and confirmed the issue "has been raised with the Treasury" and that he would share "any response received".
The Treasury welcomes views from the industry and we encourage the industry to continue to engage with the regulators who are responsible for setting regulatory fees. -- Treasury spokespersonLast week, MP Stephen Timms, chairman of the Work and Pensions Committee, suggested advisers who had concerns about the pension advice gap widening as a result of punitive fees should submit their responses to the WPC's inquiry into pension freedoms.
The Treasury acknowledged that it has received correspondence from MPs, advisers and others relating to calls to review the funding structure of the FCA, and said it was "aware of concerns about the impact of regulatory fees on financial advisers".
When asked whether it will commit to assessing the need for a funding review, a spokesperson for the Treasury commented: "The Treasury works closely with the FCA to ensure that the market for financial advice works well. However, the FCA operates independently within the statutory framework agreed by Parliament and is responsible for setting the regulatory fees on industry.
"We are currently working with the FCA to support its monitoring the impact of the increased regulatory fees. The FSCS has also said it will be working closely with industry and regulators to understand any concerns about updates to this year’s levies and seek to explore how they can be addressed."
Financial Adviser also asked whether the Treasury would be amenable to discussion/consultation with the financial services industry over how a potential restructure might best be carried out.
In response, the spokesperson said: "The Treasury welcomes views from the industry and we encourage the industry to continue to engage with the regulators who are responsible for setting regulatory fees."
What sort of levy in the future?
Last week, more advisers joined Financial Adviser's Keep Fees Fair letter-writing campaign, which has template letters kindly supplied by compliance expert Phil Dibb and by the Personal Finance Society.
Many have called for either a product levy or a market and assets-based levy as a reasonable means of changing the structure.
Ken Davy, chairman of SimplyBiz, said product levy proposals in the past may have been seen as a "clumsy and complicated way" of "adding extra cost to policies", and this was not the best option.
Instead, he has called on the Treasury to consider a "simpler type of ‘product levy’ which would be easy and cheap to administer and fall on the companies who benefit directly from the financial advice given by advisers".
He explained: "This would be a levy on the billions of pounds of funds accumulated and managed by the product manufacturers. The amount required would be a tiny fraction of the annual charges made on the funds and be totally irrelevant to any individual policy holder or provider.
"It would also follow the best practice code as regards any levy or tax, in that it would take the smallest amount from the broadest possible collection base, while also being cheap to administer."
Philip Hanley, director of Philip James Financial Services, wrote to his constituency MP Robert Courts to ask him to engage in dialogue with the Treasury and "bring the FCA to the table".
His letter, seen by Financial Adviser, read: "The current regulatory structure means we and the 99 per cent of 'good guys' pay to compensate investors duped by 1 per cent of 'bad eggs'. The regulatory bodies are, of course, independent of both the industry and government, and so we have no control over their financing.
"I was pleased to see my share of the FSCS levy will pay their chief executive's salary for around six weeks. Your former colleague Nicky Morgan recently joined its 10-strong board of directors. There surely needs to be some control of and cap on its costs and a consequent review of its means of funding."
He advocated the PFS's suggestion of a levy applied across the market and based on assets as a fairer and more proportionate way of raising the revenue needed for compensation.
Mr Hanley added: "I would implore you to engage in whatever dialogue you can with the Treasury in order to bring the FCA to the table. I know there have been such consultations in the past, but time has passed and the problem is more acute. Action has become imperative to stave off an entirely predictable disaster."
Names in the Frame:
So far, the Keep Fees Fair campaign has heard of the following MPs receiving letters.
Alex Chalk, MP for Cheltenham
Bill Esterson, MP for Sefton Central
Chris Elmore, MP for Ogmore
Crispin Blunt, MP for Reigate
Damian Hinds, MP for East Hampshire
Diana Johnson, MP for Hull North
Elliot Colburn, MP for Carshalton and Wallington
Emma Hardy, MP for Kingston upon Hull West and Hessle
Jeremy Quin, MP for Horsham
Jesse Norman MP, financial secretary to the Treasury
Jonathan Gullis, MP for Stoke-on-Trent North
Karl Turner, MP for Hull West
Liam Fox, MP for North Somerset
Mark Fletcher, MP for Bolsover
Mel Stride MP, chairman of the Treasury Committee
Rishi Sunak, chancellor of the exchequer
Robert Courts, MP for Witney
Stephen Hammond, MP for Wimbledon
Stephen Timms, MP for East Ham and chairman of the Work and Pensions Committee
Stuart Andrew, MP for Pudsey
If you know of any other MPs who will have received letters, do let us know so that we can create a 'campaign map' of constituencies where there have been positive responses.
Simoney Kyriakou is editor of Financial Adviser
To take part in Financial Adviser's Keep Fees Fair campaign, we can send you the two template letters to adapt and send to your MPs. Email simoney.kyriakou@ft.com
