Keith Richards, the Chief Executive of the Personal Finance Society, says that action is needed by the FCA to combat the rising costs felt by advisers due to FCA fees and Financial Services Compensation Scheme levies. In March it was announced that the cost to advisers would rise by 10% due to a rise in the fees. [1]
“Regulation is a key component of providing protection and influencing good outcomes for the general public.” Said Mr Richards.
“But it is becoming increasingly unreasonable to continue with an outdated funding system that levies unfairly against a smaller number of contributors in a totally different post-RDR landscape. Regulatory fines were originally intended to influence behaviors and ultimately help fund regulation. They should also be providing a dividend for the most compliant, who should pay the least. Instead, all fines now go to the Treasury and the increased cost burden is being shared by a reducing pool of advisers.”
Such a review of fees was promised by the FCA as far back as April 2013, but has since been put on hold.
Richards added: “The industry must, of course, make a proportionate contribution to regulation and consumer protection, but it is time to objectively review whether or not the current system is fit for purpose and explore alternative options such as re-directing fines and perhaps the introduction of an investment, or policy levy.
Mr Richards also goes on to suggest that the system is in need of greater transparency in relation to fees. “The current system is also very opaque from a consumer perspective, with regulation, FSCS, MAS and Pension Wise all appearing to be free. An additional benefit and objective therefore should be greater transparency for consumers, with costs visible from the outset instead of them being bundled into firms’ charging structures.”
“As it stands at present, the uncertainty regarding risk and costs is driving advisers to consider an early exit and restricting the flow of new blood into the profession. It is also driving the wrong behaviors, with new entrants trying to meet the growing consumer need for access to advice by operating non-advised or non-regulated models.
“With the implementation of the new pension freedoms and the anticipated increase in consumer demand, we need to address this issue sooner rather than later.”
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Sources
[1] Mortgage Introducer Online: PFS calls for urgent FCA regulatory review (2nd June 2015)
