“The sad reality of this is that these FSCS and FCA fees mean it costs more money to run a network and that will come down to all stakeholders in that network model at some point. Sadly, it might even hit consumers depending on the way the fee is restructured in future years with no end in sight.”
Jon Round, group financial services director, added: “This is just really, really bad business practice for us not to know the fees until half-way through the year.”
It’s hard to run a business with the level of fitness, properness and financial propriety expected with partial knowledge on the incoming fees, he added.
“This is not an insignificant amount of money. It contradicts the obligation to run your business on a sound financial footing,” he added.
Smith (pictured) said: “This is hitting the whole intermediary space. If you’re an Appointed Representative (AR), you’re part of a network, so we have some options in terms of how we charge this. If you’re a directly authorised firm (DA) you’ve got to pay this and you’ve got to pay all the fees up front.”
“We all represent our intermediaries who look after the end customer and this is the time to put down any competitive differences that you’ve got and stand together.”
Primis called for the industry to collaborate and work with the Association of Mortgage Intermediaries (AMI) which hit out immediately after the CP21/8 paper landed in April, which offered a five week consultation period.
AMI chief executive Robert Sinclair criticised both the regulator’s approach to getting networks in line and the huge FCA fee uplift expected to raise in the region of £10m with exact figures expected to be confirmed in July or August this year.
Against a backdrop of rising Professional Indemnity (PI) insurance costs, the industry is already reeling from a £17m hit from the Financial Services Compensation Scheme, confirmed in November last year, to pay for the scale of poor practice in general insurance, pensions and the investment sectors.
The FCA has already warned mortgage advice firms and networks growing their adviser bases to increase their compliance functions to match their rising numbers.
In October 2020, the Financial Conduct Authority (FCA) said it will be contacting firms and networks which have grown rapidly to ensure they were still maintaining sufficient oversight. It also continues to examine firms which have multiple trading names to ensure they are not illegally offering regulated advice from unregulated organisations.
Regulator admits structure wrong
When the fees consultation paper emerged on 20 April, the Financial Conduct Authority (FCA) admitted the current funding system ‘isn’t suitable’ and that it was proactively tackling rising regulatory costs by sharpening its teeth as a watch dog.
It said its increased focus on firms operating below standard will include a firmer approach to those applying for authorisation and making better use of data and intelligence to identify harm caused by authorised firms.
“We also want to work towards a system where firms which cause redress liabilities end up paying more of the bill before recourse is needed to the FSCS,” the FCA continued.
“This would be fairer and would further incentivise firms to achieve good outcomes for consumers. It would benefit firms of all sizes.”