Small IFAs may have to pay an additional fee of around £250 to continue doing mortgage and intermedi...
Small IFAs may have to pay an additional fee of around £250 to continue doing mortgage and intermediary business when the FSA becomes the market's official regulator next year, says the latest consultation paper discussing proposed fee structures.
All firms interested in conducting mortgage from October 2004 and insurance business from January 2005 will be asked to either register for the first time or complete a "Variation of Permission" to do additional streams of business.
IFAs already doing investment or pensions business could be asked to pay up to 50% less than the total application cost of around £500 facing non-regulated advisers doing smaller amounts of business.
Officials at the Financial Services Authority say they are able to ask smaller mortgage advisers and insurance intermediary firms for a relatively low amount because the entire application process is being overhauled to encourage the switch from paper to electronic processing and reduce the amount of information companies must disclose.
However, through CP180 - fees for mortgage firms and insurance intermediaries - the FSA is only able to estimate the charges that different firms will pay, as the regulatory body still has no firm idea as to how many adviser firms and lenders will sign up to the new regulatory regime.
Estimates at this stage suggest around 25,00 applications for authorization will be submitted to the FSA while 4,000 applications will be submitted for additional authorization to do insurance or mortgage business with clients.
Total cost of setting-up regulation of the mortgage and insurance is expected to cost around £33m, says the FSA, but it may be that firms will have to be asked to pay more in fees at a later date if fewer than the 25,000 new adviser firms and 4,000 existing firms sign up to do additional regulated business.
Financial services firms will fall into one of three bands of business, which reflects the level of annual income they receive as a result of advice given in that sector, and application forms have been redesigned to try and simplify the process.
Smaller intermediaries with an annual income of less than £1m will pay around £500 to become a regulated mortgage or insurance adviser, but this figure assumes that the application has been filed early and through electronic rather than paper processing. Costs will obviously be higher if processed the traditional way.
Larger firms with annual income exceeding £25m will be asked to pay around £22,500 to sign up to the new regime, again providing they do so through the electronic process.
Table 1: Suggested fees to be paid by authorized mortgage and insurance adviser firms:
|Fee-block||Authorisation Fees (£)|
|Early application||Standard application|
|Authorisation fee bands Annual Income (£m)||Electronic||Paper||Electronic||Paper|
|A.18 - Mortgage advisers and arrangers;and||0 - 1|
>1 - 25
|A.19 - General insurance intermediaries|
0 - 1
>1 - 25
Table 2: Proposed fee blocks and authorisation fees:
|Fee-block||Fee-payer falls into the fee-block if|
Mortgage advisers and arrangers.
|its permission includes one or more of the following:|
Advising on regulated mortgage contracts; or
Arranging (bringing about) regulated mortgage contracts; or
Agreeing to carry on a regulated activity which is within either of the above.
General insurance intermediaries.
|its permission includes one or more of the following, in relation to a contract of insurance:|
dealing as agent;
arranging (bringing about) deals in investments; or
advising on investments; or
agreeing to carry on a regulated activity which is within any of the above;
but does not include any of the following:
effecting contracts of insurance; or
carrying out contracts of insurance.
John Tiner, FSA managing director for consumer, investment and insurance, says changes have to be made to the applications process because the sheer number of applications is much higher than the FSA has ever faced before and to reflect the huge potential numbers of smaller firms.
"We anticipate dealing with some 40 or 50 times as many applications for authorization in 2004 than we would expect to handle in a normal year," says Tiner.
"We plan to streamline the authorization process significantly, to make it as straightforward as possible, but it will still be easier for firms, as well as for us, to apply on a timely basis.
"Our current application fees are based solely on the type of business that a firm is carrying out. For mortgage and general insurance business, we are proposing to charge fees based also on the size of the firm's business, we are proposing to charge fees also on the size of the firm's business, in recognition of the many thousands of smaller firms that operate in this market," adds Tiner.
Additional sections of CP180 also detail the operation and funding of the Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Services (FOS), which has to be paid for through the fees paid for regulated firms.
However, the FSA points out there is no consultation on these sections.
Responses to CP180 must be submitted to the FSA by June 24th, so a further feedback statement detailing final fee blocks and application fee policy can be presented this summer.
EIS and Seed EIS sectors
'Truly making a difference'
Avoidance, evasion and non-compliance
From 6 April 2019