We received our annual Financial Services Authority (FSA) invoice today.
As an authorised and regulated firm of Chartered Financial Planners, the fees we pay each year to the FSA and other bodies are the price we pay for our participation in the retail financial services sector.
These fees do have a nasty habit of increasing each year beyond what any reasonable business owner might expect.
On the same day that we saw the official price inflation figures at 4.5% for the Consumer Prices Index (CPI), our regulatory fees increased by 16.7% compared to last year.
Looking at the individual items within the invoice, our FSA levy is down slightly compared to last year, as we have one fewer Approved Person in the team compared to our 2010 invoice. The FSA annual levy for Informed Choice is 20.8% lower compared to last year.
The contribution we make to the running costs of the new Money Advice Service is up 37.3% compared to last year. We are paying £1,135.53 this year for the Money Advice Service.
The biggest increase this year is the levy we pay to the Financial Services Compensation Scheme (FSCS). This is up 148.5% compared to last year, to pay compensation to those investors in failed schemes such as Keydata and others.
We continue to feel that the way in which the FSCS is funded is grossly unfair, with those advisers who have never recommended flawed investment schemes paying for the mistakes of advisers who, in many cases, are now out of business and make no contribution to these costs.
Our Financial Ombudsman Service (FOS) levy is up 48.2% compared to last year, although this fee only represents 2.3% of the total invoice.
As a firm we have never had a single complaint referred to the Ombudsman, although we recognise the importance of this service for investors, particularly when banks are rejecting valid complaints about their advice.
Direct regulatory expenses for the business will represent 6.9% of our total expenditure in 2011, assuming there are no more nasty surprises in the form of another interim levy for the FSCS later this year.
The indirect cost of regulation is harder to quantify, but accounts for at least the same again.
We estimate that each of our clients will pay an average of £62.45 this year for direct financial services regulation and education expenses.
It is important to share these numbers because we feel our clients should be able to determine whether the cost of regulation represents good value.
Regulation in UK financial services is important to protect consumers from the worst practices of unregulated financial salespeople. It works in places and is open for valid criticism in other areas.
It will be interesting to see whether the Financial Conduct Authority, which is due to replace the Financial Services Authority, is able to better manage the annual cost inflation of regulation, which is always paid for by the consumer of financial services.
Photo credit: Flickr/Yoshimai
