Adviser trade association the Association of Professional Advisers (APFA) has said it believes that the consumer credit authorisation fee to be charged to financial advisers by the Financial Conduct Authority (FCA) is unjustified.
Clarification has recently been issued to investment advisers as to whether they require consumer credit permissions from the regulator. It has been known for some time that any firm that offers the option for a customer to pay an advice fee in four or more instalments would require this permission. More recently, it has been confirmed that any advisory firm who gives advice to a customer on one or more specific debts also requires credit permissions. An investment adviser might be expected to recommend that a customer pays off a particular debt before considering investing a lump sum, and doing so is deemed to be ‘debt counselling’.
The FCA now proposes to charge advisory firms an authorisation fee of £300 for this consumer credit permission. However, APFA has questioned whether this is an appropriate charge, given that the additional regulatory burden placed on the FCA by the change in the firms’ permissions will be negligible, and that these firms will receive no revenue from credit activities. APFA says in its paper: “It is therefore difficult to know what regulatory costs a £300 annual fee is intended to cover,” and goes on to suggest that a much reduced charge of £25 or £50 would be more appropriate.
APFA also highlighted the issue of firms with this permission needing to pay a larger levy to fund the Financial Ombudsman Service. The Association believes this is unnecessary given that consumer credit complaints against investment advisers are “extremely unlikely.”
APFA Director General Chris Hannant commented:
“We … do not believe that the £300 consumer credit fee proposed by the FCA is justified when the vast majority of adviser firms are only obtaining consumer credit authorisation to ensure they do not fall foul of the unclear rules. We urge the FCA to significantly reduce this charge.”
Mr Hannant also added:
“We are also disappointed that the FCA is not continuing with its fundamental fees methodology review.”
This refers to the fact that APFA has for some time called for a wide-ranging review of the authorisation fees system, to reflect their belief that financial advisory firms present a much lower risk to the regulatory system than other types of regulated firm.
However, APFA did welcome the changes made by the FCA to the fee structure for firms in blocks A12 and A13, which respectively encompass advisory firms that hold client money and those who do not; and to the arrangements for funding the Money Advice Service, and said firms’ costs should reduce as a result.