The Financial Conduct Authority (FCA) has set out plans to cut regulatory fees by reallocating advisers who have permissions to hold client money or safeguard and administer assets to different fee blocks.
Under the proposed rules adviser fee block A13 will be merged with block A12 before a new block, A21, is formed in April next year.
The move will mean a reduction in fees for most advisers of about £4 on every £1,000 earned.
The FCA said it was considering the move to remove an anomaly in the fees system which allowed advisers in the A13 block to "lower their fees by taking on the additional permission of holding client money and safe custody assets, even though they do not want it".
Under the proposals fee block A13 will be the home of advisers who do not hold permissions for holding client money or assets, whereas A21 will be the new block for those holding those permissions.
The re-modelling would mean that advisers in fee block A13, who are currently paying £6.89 per £1,000 of income, will in future pay £2.84 per £1,000 of income, the FCA estimated.
The A21 block will be charged with £92.59 per million pounds of client money held plus £0.31 per million pounds of safe custody assets held.
The FCA said: "Our impact analysis confirms that firms in A13 without client money and assets permissions would have seen either no change in their fees or a decrease, while the firms responsible for higher amounts of client money would see increases.
"Overall, across the two fee-blocks, 44% of firms would have seen no change, 43% would have seen a decrease and 13% would have seen an increase."
The paper also looked at fees for consumer credit providers. Advisers mainly need consumer credit permissions for giving mortgage advice, debt counselling or credit broking services. However, they may also need the extra permission when charging their fees in installments over a period of time, as they may be entering a 'credit agreement'.
It is unclear at this stage how the changes will affect individual firms, said Association of Professional Financial Advisers senior policy analyst Clare Griffith.
She said: "If [their re-modelling] translates across into lower fees it's to be welcomed but at the moment without being able to do some modelling on individual firms it's difficult to see the full impact."
The FCA said it was expecting "large increases in fees for some firms", however it would review the outcomes of the move and consider appropriate rates following the move.
The change will also affect the way the Money Advice Service is financed, indicating a 63% hike in the A13 block, following the merger with block A12.
The levy for advisers, as currently proposed is £4.4m, compared with £2.7m for the A13 block last year. However, taking into account the £1.8m A12 was charged last year, the actual fee remained roughly the same.
An FCA spokesperson said: "It looks like it's very inflated at the moment but you have to take into account that, all being well, there will be another fee block next year, A21, which will take some of that 63% out."
The FCA will publish clear guidelines on fee allocations early next year following its consultation.
Outlook for income
Chris St John to take over £3bn UK Select Opps