The cost of advice is set to increase as the regulatory bill landing on advisers’ doorsteps has rocketed once again, the industry has warned.
FTAdviser has learned of firms receiving invoices up to 61 per cent higher than last year’s bill while some advisers claim even larger jumps in costs.
Alan Steel, of Alan Steel Asset Management, said the regulatory fees levied against his firm had increased by 44 per cent, from £150,000 to £218,000. He said this was despite his income reducing 10 per cent year-on-year.
Meanwhile Nick Bamford, of Informed Choice, told FTAdviser his total regulatory bill was up 61.3 per cent in the past year, with the compensation scheme component up 58 per cent.
Mr Bamford said: "Increases in FSCS levies and PI premiums are indicators of regulatory failure. The regulator in all its different forms has had 32 years to get rid of the ‘bad guys’ and have failed to do so."
Another firm saw its costs jump from £15,200 to £24,500 — a 61 per cent increase — despite the firm’s turnover only rising 5 per cent and there have been plenty of reports of advice firms seeing increases in the region of 30 to 40 per cent.
Ed Gibson, head of financial services at Shaw Gibbs, said the fee to be paid by his firm was up by about 48 per cent on last year. He said having to pay for the "mistakes or criminality of others" was infuriating.
Cost of advice
Now financial advisers have sounded warning bells that the much-discussed advice gap will widen further as consumers are priced out of advice when firms are forced to hike their fees in order to balance the books against ever increasing regulatory costs.
Peter Chadborn, director at Plan Money, said: “The biggest picture is that our costs will go up. The wider consequence is that the public will be priced out of getting good financial advice — that’s the real sob story here.
“We will have to put up our fees and we are at the lower end of the charging line, we’re a modest company. It is not good for the general public.”
Mr Gibson added: "Hourly rates will have to go up as we can’t keep cutting our margin. We don’t take massive bonus profits by taking 2 or 3 per cent initial fees or for implementing our recommendations, so we have to consider how we make sure we remain profitable."
Alan Smith, chief executive of financial planning firm Capital, agreed. He said the combination of a 40 per cent increase in fees and a doubling of PI costs meant the firm had “no alternative” but to increase its fees and the customers would be “paying the cost”.
Abraham Okusanya, chief executive of fintech firm Timelineapp, warned the immediate impact of the growing bills would logically be on the profitability of adviser businesses.
Mr Okusanya said: “Of course, advisers will ultimately pass on the fees to clients, but there’s a limit to that.
“Advisers have been calling for a change in the FCA approach to the FSCS levy for some time, but I wonder if we might see some sort of legal challenge or serious political lobbying to get the FCA to pay attention.”
Financial Conduct Authority bills seen by FTAdviser show the primary cause of the hike stemmed from an increase in the Financial Services Compensation Scheme levy.
The advice firm saw its FCA costs jump 6 per cent to £2,644, the Financial Ombudsman Service levy increase by 22 per cent to £177 and the guidance bill creep up from £98 to £106.
But the levy charged for the UK’s lifeboat scheme increased by 59 per cent, from £10,085 to £16,107.
Dennis Hall, chartered financial planner at Yellowtail Financial Planning, said: “The failure is the regulator not getting to grips with the real problems.
“They like to create consultations, papers, research projects — anything that doesn’t involve actually going outside and getting their hands dirty so to speak.”
rachel.mortimer@ft.com, imogen.tew@ft.com
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