With regulatory costs and the general regulatory burden for authorised firms rising all the time, one of the main trade associations for financial advisers has requested that the Financial Conduct Authority (FCA) applies common sense in a number of areas.
The first area about which the Association of Professional Financial Advisers (APFA) is concerned is the size of the FCA’s budget. The Association has called for the regulator’s budget to be frozen for the next two years. For the 2015/16 financial year, this budget has increased by 8% from the previous year, and most advisory firms have seen a 10.2% increase in their annual FCA fee. This comes at a time when firms have seen significant increases to the levies payable to fund the Financial Services Compensation Scheme and Money Advice Service, and have also had to pay the levy for the Government’s Pension Wise guidance service for the first time.
Regarding its long standing campaign to introduce a long stop – an over-riding time limit on how long after the advice a complaint can be considered – APFA reports that 76% of members who replied to a survey are in favour of a fixed 15 year time limit from the time the advice is given. 10% favour some form of insurance system to cover costs of complaints, 8% want the time limit to be set at different levels for different products, and 6% believe that the 15 year time period should only start once the firm’s liability for the advice has ended.
76% of advisers thought there would be a cost benefit to clients from introducing a long stop – at present many firms are facing higher professional indemnity insurance bills as a result of the lack of a long stop, and are being forced to pass on these costs to clients via higher advice fees. 83% of respondents believe there would be no client detriment from the introduction of a long stop.
APFA says dialogue with the FCA is continuing on the long stop issue.
The Association has also responded to concerns that the FCA may soon instruct firms to record all conversations with clients, possibly extending to face-to-face meetings as well as telephone calls. The European Union’s Markets in Financial Instruments Directive (MiFID) II comes into force on January 3 2017, and it has been suggested that the Directive will require advisory firms to record conversations as a tool to combat market abuse. APFA believes that market abuse issues primarily apply to stockbrokers, and that its members would have very little opportunity to engage in this practice, calling the issue “irrelevant” in the case of financial advisers. It has thus called on the FCA to refrain from “gold plating the rules”, and instead to “pursue a common sense approach to help firms at no risk to consumers.”
However, APFA welcomes the less onerous definition of independent advice being proposed under MiFID II.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.