The operational income budget for 2015-16 has been reduced to £223.9m, a fall from £253.7m in 2014-15, following increased pressure from trade bodies across the industry.
In January, the FOS said it would cut its budget by 13%. However, it said over recent months its general caseload – not including PPI claims – has been slightly higher than originally forecast. It also said its PPI workload is “particularly challenging” because of the uncertainty involved.
Over the coming tax year, the compulsory levy – which financial advisers have to contribute towards – has been frozen at £23.3m, and the voluntary levy will also remain at £600,000. The standard case fee cost will stay at £550.
The FOS budget is a combination of a compulsory levy, voluntary levy, group fees and case fees, and the UK body said its stakeholders have broadly supported its proposals to freeze the levy. The Financial Conduct Authority (FCA) will also be consulted on the overall levy for the compulsory jurisdiction.
“Burden on advisers”
“Any reduction in the fees levied will be welcomed by the advisory profession as it has long been thought that the overall burden on advisers was higher than it actually had to be considering the overall retail advice picture,” said Lee Robertson, chief executive of Investment Quorum.
Trade associations, industry practitioners, consumer groups, claims-management companies and the FCA were invited to take part in the discussion about the FOS budget, and many trade bodies said the FOS should streamline their operating model to make it more efficient. Many also advised the FOS to develop its current online database to make it more easily to search cases.
The operational income budget is spent on professional fees, facilities, staff and IT costs.
“New phase of cuts”
“The FOS does a good job and provides investors with additional confidence when seeking advice and implementation services,” said the director of Chapters Financial, Keith Churchouse. “With a new phase of cuts due post-election in many business service areas, it is good to see the FOS reacting positively to change.
“From an adviser’s perspective, it is good to see cost savings. Although I hope this full reduction in cost is reflected in the costs we pay. I fear the reality of the reduction in costs and bills to advisers may not match. Time will tell.”
