UK: Watchdog proposes 1.6% rise in adviser regulatory fees.

As published on international-adviser.com, Tuesday 7 April, 2020.

The Financial Conduct Authority (FCA) has said that levies for financial advisers will increase to £80.7m ($99.3m, €91.2m) in the 2020/21 financial year.

This is a 1.6% rise from £79.4m paid in 2019/20.

In a consultation published on 7 April, the FCA outlined its annual levies for the A.13 fee block; which is advisers, arrangers, dealers or brokers.

The FCA also said that there will be a 7.1% rise in regulatory levies for life insurers in 2020/21. This will increase to £47.8m from £44.6m paid in 2019/20.

The consultation ends on 19 May 2020.

Overall, the FCA’s budget is set for a 2% hike to £548.5m, which it said was due to its commitment to “delivering an ongoing regulatory activities budget that is flat in real terms”.

The watchdog’s funding requirement, which includes £15m in EU withdrawal costs and £10m to support its own transformation programme, has increased 5.2% to £587.6m.

The FCA said: “Given the impact of covid-19, we have aimed to protect the smallest firms by freezing minimum fees.

“This means that the 71% of firms that only pay minimum fees will see no change in the fees they pay.

“To help medium sized and smaller firms, we are extending the period for paying their fees by two months to 90 days.”

Some 89% of firms will have until the end of 2020 to pay their fees and levies, while larger firms will be expected to pay their fees under the usual payment terms.

Also, the Financial Ombudsman Service (FOS) has asked the FCA to recover £83.9m through the general levy.

This is an increase of £38m compared to 2019/20, which is due to changes in the Ombudsman Service’s funding model.

This means that, while the levy is still going up this year, for many firms the increase will be significantly smaller than it would have been without this change.

The service will absorb the cost of these changes – which amount to £25.4m in total – by reducing its reserves.

While case fees are increasing, the number of free cases has increased from 10 to 25, meaning that the vast majority of firms will not pay case fees.

The FCA said it will continue to work closely with Financial Services Compensation Scheme (FSCS) to look at the likely future implications of covid-19, and work with firms to ensure that “any failures are managed in an orderly fashion”.

The regulator is “putting additional resources into monitoring and analysing firms’ financial positions, so that we can intervene rapidly where necessary” and it “will continue to discuss how to reduce compensation costs”.

The Money and Pensions Service (Maps) has asked for £130m for 2020/21, which is 21% more than for last year.

The Treasury has requested that the FCA raise £6.2m for this in 2020/21, up from £5.7m in 2019-20.

Also, advisers will get £4.4m returned to them in rebates, out of a £51.8m pot collected from retained penalties and fines.

The FCA is also looking to raise £2.3m to fund a campaign to tackle consumer harm related to the pensions and retail investment markets.

It will publish a separate consultation on this plan.

Charles Randall, FCA chair, said: “We are particularly concerned at the moment about retail investments and the harm caused by fraudulent and high-risk illiquid investments and this year we will prioritise helping consumers make better investment decisions.

“We recognise that markets change and evolve quickly – the greatest source of harm today, may be less acute in the future.

“To ensure that the overall campaign reflects the dynamic nature of markets, we will review and assess where the greatest and most acute areas of harm exist, and adjust our campaign to address them.

“We will do this by continuously monitoring industry intelligence, consumer contacts to our consumer helpline and feedback on the campaign messaging.”

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