Industry survey seeks to establish cost of regulation to financial advisers

The Association of Professional Financial Advisers [APFA] said that it was "more important than ever" for the trade body to hold accurate data, ahead of the publication of the Financial Advice Market Review (FAMR) by the UK government and regulators.

Advisers spent a combined £460 million on regulatory compliance costs in 2013, according to APFA's first 'cost of regulation' survey.

"In a year which has seen recent increases in the levies placed upon advisers for the FSCS [Financial Services Compensation Scheme] and FCA [Financial Conduct Authority], as well as changes to Mifid II and elsewhere, it is vital that we have reliable and up to date figures on the true cost of FCA supervision to properly hold the FCA to account," said APFA director general Chris Hannant.

"We appreciate that people will need to collect the information required for the survey, but with HM Treasury and the FCA seemingly in 'listening mode' with the FAMR, we strongly urge the industry to get involved," he said.

The director-general of financial services at the Treasury, Charles Roxburgh, and acting FCA chief executive Tracey McDermott will co-chair the FAMR, which will also involve an 'advisory panel' of experts working within the financial services industry. They are due to report back before next year's Budget. Although much of the focus of the review will be on tackling the 'advice gap' for those of moderate wealth with less complex financial needs, it will also examine the impact of the current regulatory and legal environment on advice firms.

The FSCS, which is the UK's industry-funded statutory compensation scheme, recently increased the share of its annual levy payable by life and pension advisers by 75% against its January 2015 budget and business plan. This increase was partly driven by an anticipated increase in claims related to self-invested personal pensions (SIPPs) this year, and was not expected to cover those costs entirely, it said.

Following the FAMR announcement earlier this month, Hannant said that a "fundamental rethink" of the regulatory environment for financial advisers was needed.

"Most barriers to a thriving and varied advice sector come from unfair rules surrounding liability, including: the lack of a 'longstop' for advisers, meaning liability is uncapped and remains with advisers until death; the levy approach of the FSCS which penalises regulated advisers for those unregulated investments which go wrong as well as imposing an unpredictable and seemingly ever-increasing fee burden; and our concerns that the Financial Ombudsman Service faces systematic problems in its decision-making including the retrospective application of FCA regulatory changes," he said at the time.