The Association of Professional Financial Advisors (APFA) has proposed an overhaul to the way the Financial Conduct Authority (FCA) calculates advisers’ regulatory fees.
The APFA has proposed that regulatory fees should be based on a company’s income and not the current regulatory fee blocks, arguing it would make advisor costs simple and more predictable.
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Apfa has called for this model to be adopted for all regulated firms, not just advisors.
Options under consideration will include not segmenting the industry and charging fees based on income, segmenting firms via fee blocks or risk categories, and charging fees on a retrospective basis.
Chris Hannant, Director General at APFA, said: "The way the regulator allocates fees is a priority issue for advisers, and something we’ve explored a lot this year. When it comes to collecting future fees, we strongly believe that a common measure approach, based on income, will be simpler and more predictable than the current fee blocks.
"It would effectively use size as a proxy for risk and provide a more straightforward link with an organisation’s share of the FCA’s bill. Crucially, it would also need less administration by the regulator, meaning it would cost less.
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By GlobalData"Given the current method, despite the best efforts of FCA to allocate costs appropriately, results in a flawed outcome, we do not see any merit in persevering with it.
"We also want to see the FCA committing to fixing its budget for three years to give advisors more certainty about their future costs.
"We will continue our dialogue with the FCA on this issue, to ensure that future fees for the industry are fair, proportionate, transparent and easy to understand," Hannant added.
The trade body says the minimum fee block, where firms earning less than £100,000 pay £1,000, should be kept under any new system. Around 42% of FCA firms pay the minimum fee of £1,000.
