The Association of Independent Financial Advisers (Aifa) will not lobby the Financial Services Authority (FSA) to use excess income to reduce IFA fees, despite disliking what the regulator has done.
The comments come after an IFAonline report revealed the FSA has used excess intermediary fees to plug its pension fund deficit.
Over 500 people have so far voted in our online survey on what the FSA should do with its excess income, and an overwhelming 72% of respondents believe the excess money should be used to reduce intermediary fees.
A further 20% say the FSA should give the money back to intermediaries, while almost 8% say the regulator should be allowed to use the money as it likes.
Have your say and take part in the IFAonline poll
Tracey Mullins, head of public affairs at Aifa, says although the Association does not like what the FSA has done it recognises the regulator has to meet its costs.
She states: “It is obviously part of the FSA’s expenditure which it has to cover. The staff work for the regulator and it has to give them a remuneration package.”
Mullins says Aifa would feel more strongly if the increase in fees this year had been greater, but she believes the increase has been insignificant.
She adds: “I hope it’s not a trend that will continue. If the FSA refunded the excess it would have to do so across all sectors, not just the IFA sector, and fee-payers would probably have to pay for administering this.”
But John Ellis, head of public affairs at the Personal Finance Society (Pfs), believes Aifa should lobby the FSA to reduce IFA fees next year.
He states: “There is no other fair way of doing it. Any income over what the FSA needs should be used to reduce fees the following year.”
He adds that it has always been understood the FSA would use any excess to freeze fees the following year.
While it froze minimum fees for most fee-blocks this year, the FSA announced in its Business Plan 2006/07 minimum fees payable by small IFA firms would rise by 2.5% this year to pay for changes to the enforcement process, salary rises for staff and its pension deficit.
Philip Huges, IFA at Ward House Financial Services, states: “Many companies are closing their final salary schemes due to affordability and I find it bewildering that the FSA are not considering this as an alternative to increasing the charges to advisers who are already overburdened with costs.”
Meanwhile, Huw Roberts, IFA at Roberts Boyt & Co, adds: “Any excess should clearly be refunded to the IFA and not used against the next year's running cost. By definition if there is a surplus of fees in the previous year, the following year should be lower, and not higher.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
Joined as head of strategy, multi asset, in June
Group income protection
Nine in 10 do not have income protection
Set to become part of Single Financial Guidance Body