ARs face £10m fixed fee bill under 'flawed' FCA plans

Five-week consultation

Jenna Brown
clock • 2 min read

Moves by the regulator to introduce a flat fee structure for appointed representative firms (AR) are “flawed” and “without justification”, according to PIMFA.

The trade body said it was very disappointed with the proposals outlined by the Financial Conduct Authority (FCA) in its fees and levies consultation, which opened on 20 April and closed on 25 May.

It said the move would result in AR firms contributing an extra £10m overall to the regulatory pool for no ascertainable reason. PIMFA said the flat fee structure was without justification and there was no evidence of the issues it was seeking to address.

It added the planned changes had been subject to an "extremely brief" consultation period and presented as inevitable to firms.

PIMFA said the proposals directly penalise firms that are, in theory, best placed to have effective supervisory models of their ARs.

It explained larger firms who have an extensive network of ARs (for example, the likes of St James's Place and Quilter) tend to have invested a significant amount of money in their systems and controls and are, by "virtue of their size and scale, subject to enhanced supervisory oversight".

FCA adviser fees to rise 1.5% to £82m

The organisation said the FCA's plan was "flawed".

Senior policy adviser Simon Harrington added: "It is extremely disappointing that the FCA has taken these steps to ask firms to contribute an additional £10m to the regulatory pool without articulating exactly what that money is for.

"More broadly, the decision to, in effect, presuppose the outcome of the work programme - the specifics of which remain undefined - is something of a departure from previous market studies that the regulator has conducted."

He continued: "If the FCA believes that ARs drive significant consumer harm, it would be good to see how and the ways in which additional funding - predominantly from large, well-supervised firms with huge investment in their own controls and systems - will go about addressing this."

FCA consultation

The consultation said the regulator planned to introduce a new flat periodic fee to be levied on principal firms payable on each of their ARs.

The watchdog said its thematic reviews of the general insurance sector in 2016 and the investment management sector in 2019 identified "significant shortcomings" in principal firms' understanding of their regulatory responsibilities for their ARs.

Failings included insufficient oversight of their ARs and inadequate controls over the regulated activities for which they have accepted responsibility.  

"We are increasingly seeing more examples of failings through our supervisory and enforcement work," the FCA said. "The range of harms varies considerably - from mis-selling to fraud - but they often stem from principals' failure to oversee their ARs appropriately."

On fees, it said: "We propose setting this new flat fee at £250 which would raise additional funding of c.£10m."

More on Regulation

The MP requested better understanding on what criteria the FCA is considering if these tests have been met and what information is needed for the FCA to adjust its view.

Nick Smith MP writes to FCA: 'Implement redress scheme for steelworkers'

Welsh MP Nick Smith has written to Financial Conduct Authority (FCA) chief executive Nikhil Rathi asking him to implement a consumer redress scheme for steelworkers.

Sophie King
clock 06 August 2021 • 3 min read
FCA wins Court of Appeal case against Avacade

FCA wins Court of Appeal case against Avacade

£91m transferred into SIPPs

Sophie King
clock 04 August 2021 • 2 min read
By making these changes, the FCA added, firms can now access the sandbox testing services at the right point in their development lifecycle.

FCA opens up regulatory sandbox

Can now apply throughout the year

Sophie King
clock 02 August 2021 • 2 min read


Could the annuity revival mean retirement advice decline?

Could the annuity revival mean retirement advice decline?

Recent shift to annuities could hit advice business status quo

Julia Bahr
clock 07 February 2023 • 3 min read
Educating the FCA: How industry bodies have responded to the SDR

Educating the FCA: How industry bodies have responded to the SDR

Comparison viewed as 'the thief of joy' when it comes to the SDR

Sian Barnett Wike
clock 07 February 2023 • 9 min read
A day in the life of an adviser: Coventry-based Vicki Skinner

A day in the life of an adviser: Coventry-based Vicki Skinner

PA hears how advisers all across the nation structure their workdays

Hope William-Smith
clock 03 February 2023 • 3 min read