Under new Financial Conduct Authority proposals published this week, nine out of ten firms will have until the end of 2020 to pay their regulatory fees and levies. The concessions have been made to smaller advice firms in light of the coronavirus pandemic.
The proposals published by the FCA stated that the A13 fee block, which includes advisers, was set to collectively pay £80.7m towards its running costs in the 2020/21 year – a 1.6 per cent increase on last year’s £79.4m bill.
However, the proposals also contained a number of concessions for small and medium sized advice firms. These included a fee freeze for 71 percent of advice firms who currently pay minimum fees and a deadline extension in which to pay the bill, from 30 days to 90 days. Larger firms are expected to pay under the usual payment terms.
Though the concessions have been welcomed, for many, the cost of compensation and the Financial Services Compensation Scheme (FSCS) levies are a more pressing concern. Martin Bamford, director of client education at adviser Informed Choice, provided this response: “In the grand scheme of things, FCA fees are fairly insignificant for most firms. It’s the cost of FSCS levies and professional indemnity insurance which are the real killers.”
As the FCA consults on the management costs of the FSCS and not its level of compensation – significant pressure is placed on advisers. Mr Bamford believes that “most advisers would welcome moderately higher FCA fees if these were well spent on preventing future compensation costs, subsequently bringing down our biggest regulatory expenses.” He also that said the deadline extension for paying this year’s fees also had limited benefit, with “any firm unable to pay their fees within 30 days just as likely to fail to pay in 90 days”.
Calls to be more inclusive
Another contentious point was the exclusion of larger firms from the concessions. Prior to this week’s announcement, the Association of Mortgage Intermediaries had warned the FCA against “discriminating in favour of smaller firms” when considering any fee cuts during the Covid-19 pandemic. The AMI requested that FCA considers deferring or reducing the fee costs facing all firms during the coronavirus epidemic.
The impact of the pandemic is also likely to see compensation paid by the industry to consumers increase, which would place an “additional burden” on advisers via the FSCS. In the consultation paper the FCA said the cost of the FSCS compensation levy was “significant” but was a direct consequence of firm failure which the watchdog had “no role in setting”. Instead, the FCA intend to focus their work on anticipating where these failures may occur.
Your team at Briars are here to help with any questions that you may have concerning these new concessions in relation to your own business; Or if you require other information or support, please do not hesitate to contact us here at firstname.lastname@example.org