The Financial Conduct Authority has announced it is increasing its annual funding requirement for advisers by 5.6 per cent from July.
In a policy statement published yesterday (June 28), the regulator said the AFR for advisers will go up from the proposed amount of £86.5mn in April to £86.8mn from 2022/23.
The FCA outlined the number of advice firms has fallen, with an estimated 11,651 firms in 2022/23, compared to 11,901 in 2021/22.
The regulator said minimum fees for advice firms will increase to £1,500 for 2022/23, from £1,151 in 2021/22, and increase further to £1,750 in 2023/24.
These rises will continue with the fee set at £2,000 in 2024/25 and £2,200 in 2025/26.
Speaking to FTAdviser, Thameside Financial Planning director Tom Kean, said: “It's rather depressing and predictable, but for me, the stand-out bit of this is the increase for us IFAs due to our decreasing numbers. Keep this up and there will be none left.
“Never mind, let me think about my own increased costs, including our own increase in national insurance for staff. It wouldn’t feel so bad if I felt we got value for money, but I’m afraid I don’t.”
He added: “Perhaps they’d consider scrapping the utterly pointless resilience survey, to be done on top of our six-monthly RegData efforts. Now that would cheer everyone up for starters.”
In response to its consultation, the FCA said it received a significant amount of feedback that it should not increase fees, especially minimum fees for small firms.
“One respondent asked us to commit to freeze minimum fees for a period once they had all been set at £2,200 in 2024/25,” it said.
But responding to the feedback, the FCA said it froze the minimum and flat-rate fees for two years during the pandemic.
Meanwhile, despite the hike for advisers, the FCA said since consulting, it has reduced the overall AFR from the proposed £640mn to £630.9mn.
This is still an increase of £17.2mn (2.8 per cent) over 2021/22 but is less than the £26.4mn increase proposed in April.
It has also reduced the fees payable slightly, from £591mn when it consulted to £581.5mn.
The FCA said it was able to do this by taking into account feedback from smaller firms in particular as it is phasing the increase in minimum fees over four years instead of three.
Changes include uplifting the charges for appointed representatives in line with inflation which has reduced the fee per AR from £287 to £266 and per introducer AR from £86 to £80.
The AFR for this fee block has been reduced £0.1mn as a result.
The City watchdog said it was able to reduce the total amount of fees payable by retaining sufficient revenues from financial penalties to cover its 2021/22 enforcement costs.
“We apply these as a rebate against the following year’s fees and the balance paid to the Treasury,” it said.
During the proposals, the FCA estimated the revenue from financial penalties at £49.1mn but this is now £49.4mn.