Summary of main points
Proposal to move from Approved Person-based tariff to income-based.
AIFA notes that whether fees are raised on the basis of the number of Approved Persons or on an income basis, the same total amount will be raised and in either option there will be winners and losers. But IFAs generally prefer the simplicity and certainty of the AP measure and the proposal to switch to an income-based tariff is, for the most part, unwelcome.
The AP system can more easily be monitored by the FSA too. This is particularly relevant for large members such as networks where there is a constant stream of new entrants and leavers. In any firm where the fees are passed on to Appointed Representative firms or individual advisers, the cost of allocating the fees proportionately on an income basis will be higher.
An income-based tariff is also likely to have the perverse effect of penalising efficient firms, which in many cases have invested in quality back office support and compliance staff or systems. It is more than likely that this investment is the reason why these firms generate higher income per capita. It could be argued that firms with tighter controls require less regulatory attention.
Collection of fees
In general AIFA finds the FSA’s procedures for the invoicing and collection of fees acceptable. AIFA accepts that a single invoice covering FSA fees, FOS and FSCS levies will increase efficiency and help to contain costs. But the drawback is that this would remove the ability of IFAs to pay the Financial Ombudsman Service general levy on a quarterly basis. This is particularly significant now that the FOS general levy has increased substantially this year.
In the future, the introduction of mortgage and general insurance regulation will result in the majority of IFA firms falling into more than one fee-block, thus further increasing combined regulatory costs.
AIFA has repeatedly asked the FSA to allow firms the option to pay fees by instalments, and in the light of impending increases, we ask the regulator yet again to reconsider its policy.
A copy of AIFA’s full response to CP 04/02, can be accessed by clicking on the link below:
http://www.aifa.net/publicnews/pressreleases/attachments/CP04_260404.pdf
