The survey found that for 2014/2015, of the 12% total, firms were spending 3% on direct fees and 9% on indirect costs. These proportions are unchanged from the previous survey for 2013/2014.
“With total revenue earned from all regulated business done by financial advice firms in 2014 amounting to £3.9bn ($5.86bn, €5.5bn), this means the sector spent an estimated £475m on regulation in 2014, a slight increase on 2013’s £460m,” APFA said in a statement.
“Assuming these costs are all passed on to the consumer, we estimate that the average client is paying in the region of £160 each year towards the cost of regulation,” it said.
Advice gap
The survey comes as the UK Treasury and the Financial Conduct Authority (FCA) conduct consultations with the industry to gather input on the widening gap between the advice consumers are prepared to pay for and what the industry can afford to provide.
It is also looking at whether there are any regulatory barriers facing UK advice firms, and is covering the full scope of retail products in the financial market, including pensions, savings, mortgages, and insurance.
APFA said, with the Financial Advice Market Review (FAMR) under way, it planned to use the results of its survey in its conversations with politicians, regulators and others in the industry to seek to reduce the regulatory burden placed on advisers.
“It is of course incumbent upon the industry to find new and innovative ways of reducing the cost of financial advice to those consumers that want it. However, it is clear from our research and echoed by others that a significant proportion of firms’ costs arise directly from regulation,” it said.
