In response to questions raised as part of our Keep Fees Fair campaign, a spokesman for the Treasury told Financial Adviser they were aware of advisers’ and their MPs’ communications.
The spokesperson said: "We are currently working with the FCA to support its monitoring the impact of the increased regulatory fees.”
The spokesperson also confirmed the Financial Services Compensation Scheme would 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”.
Fiona Kidy, chief financial officer for the FSCS, said: "We share the real desire to help reduce the levy on the industry and protect customers. As part of our strategy, FSCS is collaborating with FCA, the Financial Ombudsman Service and the Insolvency Service around phoenixing."
She said in addition, the FSCS has sought to address these concerns by convening industry panels to exchange information on current issues and potential concerns in the investment and pensions and general insurance markets.
This came as advisers continued to lobby their MPs, as well as members of the Treasury Committee, to push for a review of the way in which the FSCS is funded. Some of the MPs writing to the Treasury Committee and HM Treasury are cabinet ministers.
The letters, part of Financial Adviser's Keep Fees Fair campaign, highlight the problems arising due to escalating professional indemnity insurance premiums and a contraction in the market, in addition to eye-watering annual increases in the levy advisers must pay.
Some advisers have been hit with hikes of 80 per cent, 90 per cent and even 120 per cent for this year’s regulatory bill.
Responding to one adviser's letter, that of James Carroll of Hughes Firman Ovel, secretary of state Priti Patel said she acknowledged his concerns and agreed the FCA needs to be an effective regulator. She also said she would raise Mr Carroll's concerns.
In her response, seen by Financial Adviser, Ms Patel said: "I have noted your comments and concerns. Given the regulatory failures that happened in advance of the financial crash and the need for confidence in the financial profession, it is important that the FCA is an effective regulator.
"I would be glad to raise your concerns directly with ministers in the Treasury and the governor of the Bank of England for them to consider and respond to."
The Treasury Committee, in its hearing with the FCA's new chief executive Nikhil Rathi this week (November 4), confirmed it had received a "huge amount of correspondence" from IFAs on the FSCS levy.
But the FCA boss said while the regulator was aware of the "burden" increasing regulatory costs were putting on the advice community, "for the majority of advisers it's a small portion of their overall regulated income".
Mr Rathi said the focus for the FCA was preventing the situation arising in the first place and catching bad apples earlier.
He added: "There are other solutions worthy of exploration, including insurance for advice firms".
Twin threats
Chris Groom, principal of Calver Groom Financial Management, wrote to Elliot Colburn, MP for Carshalton and Wallington: “The already existing advice gap will just get even wider, meaning many more people who desperately need help with later-life planning, wills, passing on wealth etc, are going to be left stranded.”
Heather Dunne, pensions transfer specialist at The Pensions Experts, urged her MP, Tom Tugendhat (for Tonbridge and Malling), to encourage a review not just of the FSCS levy but also the difficulty in getting suitable PII cover.
She claimed these twin threats were making it worse for consumers who need advice on this area, especially post-Covid.
She wrote: “Financial advisers are suffering from an inability to advise on an area that is exceedingly relevant to many clients, incurring significantly higher PII premiums, together with larger FSCS bills.
“At the same time, those advisers are also being charged more by the FCA. Those advisers have been suffering from reduced income, because the FCA and its predecessors has altered the rules to minimise charges, as against increasing value.
“When the markets fall as they did earlier this year, many advisers’ fees, which are based on a percentage of funds under management, also reduce. The Covid-19 impact has increased their workload, because their clients need more reassurance and guidance during these difficult times.”
Ms Dunne added the situation had been exacerbated by the regulator demanding additional statistical information within exceedingly short timescales.
She said: “The current system will result in there being fewer financial advisers, which directly impacts on the ability of the public to obtain advice. This will make them more vulnerable to poor financial consequences and scams.
"This is not a personal view; it is a known fact evidenced by a shrinking adviser population meeting higher regulatory PI and compensation costs.”
In response, his office asked Ms Dunne if she wished Mr Tugendhat to raise the points she had made with “Rishi Sunak, chancellor of the exchequer at HM Treasury, so he can look into this matter further.
“In the meantime, please let me know if there is any further action you would like Mr Tugendhat to take urgently on this issue, otherwise I shall await your response.”
It is understood that a LinkedIn Group, Financial Planners United, have also been in contact with the Treasury Committee, asking it to organise an inquiry into the burden faced by the profession.
Letters have gone out to the Treasury Committee, including from Paolo Standerwick, managing director MLP Wealth Management Ltd, who wrote to Mel Stride, chairman of the Treasury Committee, and all the committee members.
Mr Standerwick said: “We are asking you... chairman of the Treasury Committee, to embark on a detailed enquiry on regulation and its costs as well as the legitimacy of what can only be described as a broken system.
“The increasing FCA levies and the ever-increasing cost of PII will, and already has put, well-run firms out of business. Those who survive [may have to] place significantly increased costs onto their clients.”
simoney.kyriakou@ft.com
