Anonymised data seen by this publication indicates one business of five advisers saw its total regulatory bill increase by almost 165 per cent from £19,400 in 2018 to £51,400 this year.
This was despite the company only gaining one adviser over the two-year period and annual income rising by just £142,000 since 2018.
The same company saw its professional indemnity premiums jump by 52 per cent in the last year to £22,700, despite having no complaints made against it to the Financial Ombudsman Service over the past five years.
It is a pattern familiar to many advice companies this year, as a growing Financial Services Compensation Scheme levy drives exponential increases in regulatory bills, which have forced some to increase their fees in an attempt to balance the books.
The annual regulatory bills advisers receive from the Financial Conduct Authority include the regulator’s own fees, but also contributions to the FSCS levy, the Fos and the Money and Pensions Service.
Another advice company based in the south of the UK saw a 163 per cent increase in its regulatory bill, which rose from £10,900 to £28,700 in the two years since 2018.
The business also witnessed a surge in its PI premiums of almost 155 per cent, with this bill rising from £26,600 in 2019 to £67,900 this year, despite it having no complaints against it at the ombudsman in the past five years.
The advice companies, who wish to remain anonymous, provided the data securely via IFA Compliance News as part of its campaign to reform regulatory costs.
Writing to MPs
Phil Dibb, compliance consultant and director at IFA Compliance News, has urged advisers to write to their MPs highlighting the growing cost of the FSCS, in a joint industry effort he hopes will see two letters sent to all 650 MPs.
Mr Dibb warned of an “increasing financial strain” on “good quality, reliable firms”, which risks putting well-run advisers out of business.
A further two small businesses saw their FCA bills rise by 139 per cent and 137 per cent over a two-year period, despite only reporting increases in annual income of £280,000 and £7,000 respectively.
| Example A | Example C | Example D | |
| Number of advisers | 5 | 2 | 2 |
| Income to nearest £10,000 in 2018-19 | £1.53m | £850,000 | £623,000 |
| Income to nearest £10,000 in 2020-21 | £1.68m | £1.13m | £630,000 |
| Regulatory bill 2018 | £19,400 | £14,000 | £8,000 |
| Regulatory bill 2020 | £51,400 | £33,500 | £19,000 |
Source: IFA Compliance News
Mr Dibb said: "The IFA industry is at a real crossroads, with fees increasing significantly with no knowledge of what 2021 might bring.
"The PII market is getting more difficult by the day and this is before the busy period usually seen in October and November.
"Directly authorised IFA firms need to come together, as it could get a lot worse before anything improves."
Financial Adviser's own Keep Fees Fair campaign is ongoing and a number of MPs have called on the Treasury to review the way in which the regulator and compensation scheme are funded.
Widening advice gap
Ray Tuffield, managing partner at Courtney Havers LLP, said the FSCS levy represented 85 per cent of the latest invoice received by his company from the FCA.
He said: “I fear that more firms will throw in the towel due to the increasing cost of regulation, which will ultimately limit choice and widen the advice gap.
“The good guys can’t keep picking up the tab for the bad guys; it’s just not sustainable.”
He added: “Clearly, a funding solution for the FSCS levy needs to be found and quickly, whether it be a product levy or a risk-based solution. The whole industry needs to come together on this and now.”
Mr Dibb said: “The IFA industry is at a real crossroads. Fees are increasing significantly with no knowledge of what 2021 might bring.
“The PII market is getting more difficult by the day and this is before the busy period in October to December. Directly authorised IFA firms need to come together, as it could get a lot worse before anything improves.
“In my opinion, a FSCS point-of-sale product levy and a 15-year long-stop at the Fos – excluding exceptional circumstances – need proper consideration.”
Earlier this week the regulator renewed its attempts to probe the advice sector's stability, sending a second mandatory survey probing the financial resilience of the sector in the aftermath of the pandemic.
According to the FCA, advisers should receive the new survey between September 16 and 22.
The first Covid-19 survey sent to advisers in June revealed the industry was coping well with the economic impact of the pandemic, with only 14 companies admitting the outbreak threatened the survival of their business.
rachel.mortimer@ft.com
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