Regulation  

Regulatory fees have been broken since they started, advisers say

Regulatory fees have been broken since they started, advisers say

Advisers have hit out at annual regulatory fees, saying the system has been broken since it started.

The fees have begun to be sent out to advisory firms, and include the FCA’s annual fee, the Financial Services Compensation Scheme fee, as well as the Financial Ombudsman Service and Financial Guidance Levy.

Yellowtail Financial Planning managing director Dennis Hall, said: "[The levy] has been broken since it started".

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The end clients of advice firms are ultimately the ones who suffer, he said. 

“When these miscreants leave the market, it's the good guys who are left paying for it.”

He added there are issues around the early identification of potentially problematic companies.

“[The FCA doesn’t] seem to be very good at picking things off before they happen.”

Shaw Gibbs head of financial planning Ed Gibson, said what irks IFAs is the feeling that while they’re doing the right thing by their clients, they are paying for those who possibly never have any intention of doing the right thing and are just out for themselves.

“Years of seeing firms fold and then phoenix, or be called out by people in the profession but not clamped down on by the regulator, leave one resentful of the whole system,” he said.

“Whether it is fair or not to blame regulatory failure is difficult to say, but then emotionally that's not the point.”

He said although he appreciates that with professional indemnity insurance there is a group risk starting point, he would like rates to reflect firms’ claims history, advice risk profile, and work put into systems and processes to minimize risk.

“We see none of that with the regulatory and compensation fees but have to pay into a fee block regardless of our own position.”

However, one adviser was less critical, highlighted that despite finding the “delight” of an invoice hard to open due to the “crazy log system”, the amount had stayed flat.

“I must say unlike the past 10 years whereby we have seen almost a 15 per cent to 30 per cent increase most years this one has stayed relatively the same.”

Levy changes

The FCA increased its annual funding requirement for advisers' levy by 5.2 per cent earlier this year.

The FSCS levy, in contrast, dropped by £275mn to £625mn as a result of fewer self-invested personal pension provider failures and less complex pension claims.

However, commentators have raised concerns about the inaccurate forecasts, which originally put the levy for the year as over £250mn more than it turned out to be.

FCA strategy

The FCA said in its recent strategy update that increases in the FSCS levy have meant that a too-big bill of unpaid refresh liabilities from failed firms is pushed onto those remaining in the market.