In its response to the Financial Conduct Authority’s (FCA) consultation paper on regulatory fees and levies, which closed on Monday, APFA said it welcomed the regulator’s proposals to correct an ‘anomaly’ in its fee allocations.
The FCA proposed to merge adviser fee blocks A12 and A13 and create a separate block for firms that hold client money.
This meant advisers who do not hold client money will see their regulatory fees reduced by about £4 on every £1,000 earned – from £6.89 per £1,000 of income to £2.84 – the FCA estimated.
APFA director general Chris Hannant (pictured) called for an immediate implementation of the new proposals and an adjustment of the 2013/14 levy which seeks to rectify the fact that advisers have been overpaying in the past.
He wrote in his response to the paper: “We welcome the proposal to merge A12 and A13 and to introduce a new fee block for firms that hold client money/assets, as this will better reflect the relative risk profiles of firms that hold client money/assets and those that do not.
“As A13 firms have been picking up a greater share of the bill than they should have been, we would urge the FCA to bring it in with immediate effect and ensure that the 2014/15 fees are allocated on this basis.
“Consideration should also be given to making an adjustment to next year’s fees to correct the error that occurred in 2013/14.”
APFA also welcomed a proposed new approach to calculating the Money Advice Service (MAS) levy, which will create a closer link between consumer usage of MAS and the way MAS’ costs are allocated.
However, it had reservations about the levy’s link to the fees the FCA charges businesses, arguing that it should instead be linked to firms’ turnover.
The proposed ‘three component approach’ suggests combining consumer-usage data, the five MAS outcomes and a levy based on the FCA’s fees to allocate money advice costs to fee-blocks.
APFA said: “The FCA’s allocation of its costs is intended to reflect the risks and priorities of the FCA, and is not in any way related to MAS’s priorities or the way its resources are allocated. It does not therefore seem to us to be a relevant measure to use as a basis for the ‘levy’ element.
“If the principle is that all firms contribute, doing so according to size might be more appropriate.”
In its response to the FCA consultation, APFA also called for more clarity on the circumstances in which advisory firms need consumer credit licences.
“There must be clarity about where the perimeter is drawn, as it wrong to charge firms a fee when in fact the permission is not required,” it wrote.
APFA estimated that most advisers who currently hold licences do so for their credit broking, debt counselling and debt adjusting activities.
However, for most advisers consumer credit is incidental to their main business, the organisation argued.
Therefore small firms should be allowed to submit a simple statement on whether their income from consumer credit business is below the newly proposed threshold of £50,000, without needing to quantify the amount, it said.
The regulator is still consulting on turnover-based fee scaling for consumer credit licences, a revised part of the original consultation paper, which will close on 16 January.
