Dear Mr Colburn, I’m writing to you as my local MP to raise concerns over the widening financial advice gap in the UK.
This is being exacerbated by the rising costs levied on advisers in the UK, and a lack of consultative process at the Financial Conduct Authority.
While there are financial advisers in Carshalton & Wallington, I also write on behalf of the more than 26,000 subscribers to Financial Adviser, the weekly paper I edit.
I have been a financial journalist for more than 20 years and despite reading and reporting on many warnings from inside and outside of the industry for many years, I believe we are now at that very tipping point we were warned about; the point at which independent advice is pushed out of operation due to costs, and hundreds of thousands of clients are left without quality, independent advice.
Moreover, the already existing advice gap will gape 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.
Also, at a time when we are concerned with improving diversity and inclusion and access to financial services for all members of society, to remove a whole industry of local advisers is highly deleterious to the aim of social inclusion.
We need and applaud the work of the FCA in preventing scams and protecting consumers. But advisers – good advisers, who have rarely or never had a complaint upheld against them – are facing punishing hikes in the fees they pay to the FCA and exponential increases in the levies they pay towards the Financial Services Compensation Scheme.
We have heard figures of an increase of 80 per cent or more year-on-year on small companies.
The calculations seem arbitrary and punitive to a profession that has worked hard to keep its clients in good financial health. The polluter does not pay – the annual ‘punishment’ falls not on the bad apples but the good ones. Everyone else suffers financially from the actions of a few.
Moreover, the FCA said a few years ago it would not consider a ‘regulatory dividend’ for those advisers who have never had a complaint in any given year – so there is no reward for companies who always do the right thing.
Even the FCA’s chairman Charles Randell warned of the impact of fees and levies on advice and wealth management companies alongside the effects of the pandemic. Yet despite Mr Randell’s own comments, the FCA stolidly refuses to consider a review into the way it and the FSCS is funded.
I am writing to ask you to press the prime minister and the Treasury to call for a review and a consultation on the funding models for the FCA and for the much-needed FSCS.
With a new chief executive about to take over at the FCA, now is a perfect opportunity to reconsider the funding models to make sure these work for both regulator and regulated.
Alongside this, please would you ask the Treasury to carry out a review into the pernicious practice of professional indemnity insurers? They are loading premium rise upon premium rise on advisers.
Some companies have reported to us that nearly 20 per cent of their total revenues a year are now going on their PI cover, and levies to the FCA and the FSCS. Take bills, insurance, staff costs, and pension costs out of that and you wonder how any business can continue.
For the sake of small business owners, for the ‘good guys’ always striving to do the right thing for clients, and for the sake of improving inclusivity and closing the advice gap, please would you urge the Treasury to consult on the levies, alongside PI cover?
The PFS, alongside the advisory trade body Pimfa and the Association of Mortgage Intermediaries, have presented various solutions to the regulators over the past few years and none are brought to open consultation.
With a new chief executive about to take over at the FCA, now is a perfect opportunity to reconsider the funding models to make sure these work for both regulator and regulated.For example, the PFS suggests the FSCS levy should be funded not by the current patchwork of PII and levies to the FSCS, but from both the market and a levy on the £9tn of retail assets managed by the UK investment industry.
According to the PFS: “This levy – which would pay all existing compensation and fund proactive consumer education through the Money and Pensions Service, would only be c0.006 per cent of current assets under management.”
This is just one solution; as mentioned earlier, there is still a polluter pays model, or a regulatory dividend suggestion to reconsider, along with other funding models put forward by the AMI on separate occasions.
We need the Treasury to consult with the industry on this. Financial services must be allowed to thrive in the UK, especially post-Brexit. Ordinary people must be able to access financial advice and entrepreneurial business owners must be allowed to operate without fear of 80 per cent fee increases simply because they have done well for their clients.
For the sake of small business owners, for the ‘good guys’ always striving to do the right thing for clients, and for the sake of improving inclusivity and closing the advice gap, please would you urge the Treasury to consult on the FCA and FSCS levies, alongside PI cover?
Many thanks for your consideration in this matter. I look forward to hearing from you.
Best regards
Simoney Kyriakou, editor, Financial Adviser
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