Dear Sir,

Less than a fortnight ago you called for the advisor sector to prove the cost of regulation.

You commented that advisors need to provide a robust figure of the total cost of regulation in order to better hold the FCA to account.

Over 300 financial stewards from across the parishes of Britain have responded to your call and over 220 have been verified (personally) as current regulated advisory business owners.

Here are robust figures (appendix 1) showing that the total cost of regulation currently constitutes over a quarter of financial advisor business turnover.  Please note that this is a percentage figure of turnover and not profits.

As you have previously commented, this cost of trade is ultimately paid for by the public.

The profession believe in their ability to retain trust based financial stewardship locally and there is cordial agreement that the treasury should receive a willing contribution from business owners in return for providing a UK regulator.

However, if the treasury chooses (by abdication) to handicap  the advice sector and allow  a regulator to take over a quarter of business turnover (in addition to HMRC and local government levies) then it will kill the sector without giving the profession the opportunity to adapt to current market changes.

Please consider that numerous mobile and internet communications tools are diffusing rapidly and are already blurring the lines between what is regulated advice and what is mere advertising.

In terms of the “value” that the public receives for this regulation you should note that all major detriment to the public in history has been caused by poor regulation of product providers (Arch Cru, Key Data -most recently) and not ever by a lack of regulation in the local advisory sector.

The observation that; “it doesn’t matter how clean the pipes were, if the water was dirty, the people got sick”  has been put forward by the advisory profession since regulation was first developed and is re-iterated now. Further direct comments from the industry are included (appendix 2).

To look through a public paradigm, perhaps a “dragons den” test is warranted.

Until you feel that advisor owners could present their new business models to the “den”, you have not done enough to ensure the law of competition can drive this sector forward.

Communication innovations and their rapid rate of diffusion are creating a huge pace of change across all UK professional services and surely it would be a failure of duty to let the cost burden of unwarranted over-regulation kill the advisory sector before the profession  has chance to adapt?

Lastly, could you please do the courtesy of responding to the advisor owners in the UK with equally “robust figures” concerning how your regulator and its “spun out”  Money Advice Service are succeeding in their charge to bridge the advice gap left by RDR and retain a savings culture across our country?

 

Appendix 1

Survey Results

Average FCA fee as a percentage of turnover: 8.74%

Average FCA overhead cost as a percentage of turnover: 18.71%

Average FCA total cost of regulation: 27.45%

Number of verified business owners (put email in): 221

Number of leaving over the next 24 months as a percentage: 29%

Number of firms planning growing in the next 24 months as a percentage: 41%

 

Appendix 2

Advisory Business Owner Feedback

Is your IFA ripping you off?

http://stevehagues.co.uk/is-your-ifa-ripping-you-off/#comments

Just one question for the FCA

http://stevehagues.co.uk/just-one-question-for-the-fca/#comments

FCA Costs Survey – 100 firms in 1 day

http://stevehagues.co.uk/fca-costs-survey-100-firms-in-1-day/#comments