FCA hikes adviser fees by 4.7%

FCA hikes adviser fees by 4.7%

Financial advisers face a 4.7 per cent increase in their regulatory fees for 2017 to 2018.

Today (18 April) the regulator has revealed it wants advisers in the A13 fee block to pay £77.1m to cover the costs of the FCA, Financial Ombudsman Service and guidance services in 2017 to 2018, compared with £73.7m in 2016 to 2017.

Overall the Financial Conduct Authority’s total annual funding requirement for 2017 to 2018 is £526.9m, according to the 84-page consultation paper that was published today (18 April).

The regulator needs £7.6m (1.5 per cent more) than it did in 2016 to 2017 and stated this increase in the cash it requires is driven by an expectation that inflation will result in a £5.1m (1 per cent) increase in ongoing regulatory activities costs.

The City watchdog stated an extra £2.5m was needed from firms to pay for “European Union withdrawal costs.”

Also requiring extra cash from the industry is the regulator’s pension black hole.

During 2016 to 2017 the triennial valuation of the final salary section of the FCA Pension Plan (inherited from the FSA in 2013 to 2014) was completed.

This showed that the plan’s deficit has increased from £224.3m in March 2013 to around £300m by 30 June 2016.

As a result the regulator is increasing the annual contribution to reducing the pension deficit from £19.5m to about £29m from 1 April 2018 until 31 March 2027.

In addition, the regulator has made an additional contribution of £10m in 2016 to 2017.

Over the past three years the regulator stated it had tried to maintain an even distribution of annual funding requirement increases, unless there have been material and explainable exceptions not to do so for individual fee-blocks.

The paper stated the Financial Ombudsman Service has asked the FCA to recover £24.5m.

Following the transition of consumer credit regulation from the Office of Fair Trading (OFT) to the FCA, this figure includes consumer credit firms.

The proportions are similar to previous years, and according to the FCA this reflects the Financial Ombudsman Service’s forecast that complaint volumes (excluding payment protection insurance (PPI) complaints) will remain broadly stable.

Annually, the amounts actually payable by each block will vary to reflect changes in the proportions of cases in each block.

The total budget for the Money Advice Service was £75m, which is the same as last year.

However, as a result of consumer credit contributions collected from last year, as well as the anticipated consumer credit contributions for 2017 to 2018, £64.1m will be levied as opposed to £75m.

Two separate levies are being proposed to raise £23.1m for delivering money advice, and £41m for coordinating and providing debt advice.

The Department for Work and Pensions has stated the 2017 to 2018 funding requirement for providing Pension Wise will be £16.2m.

This is an estimate and may be revised when the pensions guidance levy (PGL) rates are finalised in June.

This represents a 28 per cent decrease from the £22.5m raised in 2016 to 2017.