Data collection: Small firms fear biggest bill

Small firms expect they will be hit harder by the ongoing cost of implementing the FSA's data collection rules compared to their larger counterparts and banks.

Smaller intermediaries make up the majority of firms submitting RMAR or complaint returns, the areas where the FSA has today proposed sweeping changes to how it wants data collected.

The FSA is proposing firms disclose adviser and consultancy charging revenue as well as data on client numbers and charging structures on RMARs.

It also wants to monitor complaints data for individual advisers throughout their careers, with information linked to Individual Reference Numbers.

In the proposals' cost benefits analysis, the FSA said firms with one to three investment advisers estimated lower one-off costs linked to the reforms than the larger firms, but higher ongoing costs.

Large banks, however, estimate much lower one-off and ongoing costs  due to the changes than small advice firms.

The FSA puts the industry-wide compliance bill for the changes at £1.2m initial and £1m ongoing for medium firms, and £1.5m one-off and £900,000 for small firms.

For large firms with more than 19 advisers this increases to £1.7m initial and  £700,000 ongoing.

By comparison, large banks estimate an initial cost of £800,000 and ongoing costs of £100,000.

Small firms may benefit from lower one-off costs by implementing change more quickly than larger businesses, will have fewer transactions to report, and are less likely to need sophisticated systems for data record management, the FSA said.

However, this works against them  on an ongoing basis, as the lack of systems and processes that improve efficiency and regularity of data collection could drive up costs, the FSA said.

In addition the regulator estimates the direct costs of amending its systems, collecting data and providing reporting will range from £800,000 to £1,200,000. Of this, the direct costs in relation to the complaints proposals are estimated to range from £500,000 to £700,000.

In its March Policy Statement on the RDR, the FSA said collecting data would be "an important part" of its supervisory approach in the future.