Plans to review alternative ways of allocating fees were first announced in April 2013 but were scrapped in a consultation paper on rates proposals released by the Financial Conduct Authority in March this year.
Included in the proposals was a mandate to charge fees based on income or risk.
Director general at APFA, Chris Hannant, said he was “disappointed” in the decision because it would leave advisers paying “disproportionate” amounts of the regulator’s budget relative to the level of risk they represent to consumer detriment.
"The changes to the A12/13 fee block and the changes to the MAS levy will result in a much needed reduction in regulatory costs for most adviser firms. However, given firms that were in the 'old' A13 block picked up a greater share of last year's bill than they should have done, we urge the FCA to make an adjustment to this year's fees for those firms,” he said.
“The changes that are happening in the pensions and long term care market mean it has never been more important that consumers have access to affordable advice. So we urge the FCA to restart its review."
'Broad consensus'
In March’s consultation document the FCA said it dropped the plans because stakeholders did not propose any fundamental alternatives at the outset of the review.
It added that because there was no “broad consensus” for a departure from current practices among stakeholders it would continue with its current approach to determining regulatory fees.
It said the current approach “makes a stronger link between where we allocate resources and the fees charged than the alternative approaches would, and we can operate it efficiently”.
In response to Hannant’s comments, a spokesperson from the FCA said: “We have worked hard to ensure that small firms we regulate pay the least and increases are mainly borne by larger and more complex groups.
“Stakeholders did not propose any fundamental alternatives at the outset of the review so we sought views, in principle, on two possible approaches – a revenue approach and a firms’ categories approach.
“The discussions with stakeholders yielded no broad consensus for such a degree of departure from our current approach so we have decided to stick to the current model.”
Hannant also called on the body to reconsider its proposals to insert a £300 consumer credit fee on adviser firms.
“We do not believe it is justified when the vast majority of adviser firms are only obtaining consumer credit authorisation to ensure they do not fall foul of the unclear rules.
“We urge the FCA to significantly reduce this charge.”
The FCA currently allocates fees by splitting companies into 14 different fee blocks. It then calculates the price of each block using the level of company regulatory permissions and the size of the regulatory activity they undertake.
Click here to read International Adviser’s thoughts about FCA chief Martin Wheatley’s recent calls to address the overcomplicated pitching of products to uninformed investors.
