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An IFA is taking the FSA to task over the costs of regulation after calculating the percentage of his firm’s hourly rate that goes to the FSA.
Sam Caunt, partner at Northampton-based IFA Kingston PTM, says at least £20 of his company’s average £150 per hour rate is due to FSA regulation and to plan for and cost in the RDR and capital adequacy proposals.
The cost is broken down into FSA and FSCS fees, provision for new capital adequacy rules and preparing for and implementing the RDR.
Caunt, who describes his four-adviser business as a “small town, medium client IFA”, says while some of the FSA costs are “more than reasonable”, they are difficult to justify to the end client.
“Just look at it from our client’s point of view,” he says. “Someone who wants pension sharing advice for example can see no perceived benefit to them by paying this burdensome cost and it puts into very sharp perspective the other costs the FSA are concerned about, such as platform charges, which are small by comparison.
“If a client asked me what benefit they receive from paying this additional £20, it is very hard to justify. It is incredible the FSA does not look at regulation from this point of view – how much of an hourly charge is a consequence of regulation.”
Caunt says that, within his average £150 charge, are provisions for the “huge” cost of IT and software, compliance monitoring and due diligence.
He says the FSA’s own treating customers fairly (TCF) rules require that regulatory costs and related expenses are controlled.
“The FSA – or better still an independent auditor – needs to ask whether what the clients pay IFAs for regulation is fair, proportionate and reasonable,” Caunt says.
According to Sam Caunt
Adviser hourly charge: £130.00
PLUS
FSA/FSCS fees: £4.20
TCF monitoring £1.40
Regulatory reporting: £1.12
Provision for capital adequacy proposals: £6.70
Preparation for and implementation of RDR: £7.00
Total hourly charge: £150.42
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| Comment | The hourly cost to clients of FSA regulation? £20 |
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Hoursly Cost of Clients of FSA
I agree with this article, but you should take it further. What about the increased cost in preparing for additional qualifications for all advisory staff? This currently could add as much as £20/£30 per hour at least until 2013. Given the leaked article on how Barclays advisors are alleged to be trained to treat customers as "conquests", this in one example demonstrates what a waste of time , effort and money RDR actually is.
Posted by: Ross Perry
How much time?
No disrespect intended, but I am glad he has time to work out all those figures to that degree! I prefer to get out and earn enough to cover it all!! :-)
Posted by: jag58
Balloons
If it were announced that all IFA's are to be executed and will be given the choice of hanging or beheading. There are still a few balloons in this industry who will quote the old mantra 'this is a great opportunity for IFA's. With respect jag58 sounds like one such balloon. What in effect he is saying 'no matter how much cost or injustice are heaped on the IFA community he will just get out there and pass it on to the client'. It is sadly just such apathy that has allowed the FSA to run amok without any consideration of how much cost they generate for the client as long as they line their own pockets. The writer of this article is perfectly correct in bringing attention to such spiraling out of control costs.
Posted by: David McMeekin
Transparency
As the FSA are striving for transparency and factory gate pricing for the Public good. Should the cost of compliance be a readily available figure and included in all compliant Illustrations as part of disclosure. I think £20.00 an hour is a modest assessment.
Posted by: Dave Bettley
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costs
That is an interesting cost anaylsis by the previous contributor. Apart from those costs I do not think the FSA understand the other hourly costs to come off the £130. Eg. travel,office rent, telehone,rates, gas, electricity telephone, IT. stationary, insurance, postage, etc. do I need to go on. before we actually earn a living.
Posted by: terry