But while smaller advice businesses may be able to weather the rising bills and waning revenues, warning bells have been sounded that costs will ultimately be passed to clients, which could widen the advice gap.
Joanna Leyden, director at Monument Financial, said: “The rising costs of PII and FCA fees will undoubtedly affect the cost of advice for consumers.
“Both represent a failure of the regulator to effectively police the industry and will ultimately mean that the objective to plug the advice gap for lower net worth clients will become impossible.”
Adviser shock over bills
Philip Hanley, director at Philip James Financial Services, warned advisers had been left “open-mouthed” at the latest regulatory bills, with his own rising by 85 per cent to £26,291 this year.
Mr Hanley said: “Talking to other advisers, a number are saying that being directly authorised is ‘becoming ridiculous with ever increasing costs’, and feel that the FCA would prefer to regulate a few big firms rather than thousands of small practices.
“The FCA’s [retail mediation activities return] figures, however, show that the large firm model doesn’t work, with those with over 50 advisers loss-making.”
Scott Stevens, director of adviser recruitment and acquisition at Quilter Financial Planning, said the advice industry had shown itself to be “incredibly adaptable” and advisers that transformed their businesses had emerged stronger for it.
Mr Stevens added: “The financial planning industry is a patchwork of local companies that are deeply rooted in their communities.
“This is a critical part of many firms’ DNA, but small businesses also face challenges and will need extra support when confronted with challenging trading environments.”
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