The Financial Conduct Authority (FCA) has predicted advisers will pay £82m in fees this year, a 1.5% increase from last year.
In a consultation paper, published on Tuesday (20 April), the regulator set out its annual funding requirement for the next year.
It said that advisers, arrangers, dealers or brokers with permissions in the A13 block can expect to pay £82.3m for the year 2021/22. For 2021/21, the amount paid was £81.1m.
The regulator’s overall budget has been set at £616.5m, an increase of 4.5%.
The FCA also said that because of the coronavirus pandemic, it will continue to keep its minimum fee charge the same for the coming year.
“We continue to propose not to increase minimum fees by the 2% increase in our 2021/22 base ORA [ongoing regulated activities] budget. We also kept minimum fees unchanged in 2020/21,” the consultation paper said.
It added that it believes small firms, who only pay a minimum fee, should make a contribution to the costs of regulating them that more fully reflects the costs associated with FCA authorisation and ongoing supervision.
“A firm which needs to be regulated by the FCA, even if that is for an ancillary part of its business, will recognise that regulatory approval brings value but also specific and serious obligations.
“Current consumer credit minimum fees are as low as £106 and the proposed revised fees for 2021/22 is the first stage to bring greater alignment of these minimum fees with other authorised firms who currently pay a minimum fee of £1,151.”
Elsewhere, the financial watchdog said it understood that the current Financial Services Compensation Scheme (FSCS) levy is too high.
Advisers received another FSCS levy increase this year. In its budget for 2021/22, the FSCS predicted a bill of £361m for financial advisers’ funding class – also known as the life distribution and investment intermediation class (LDII) – to pay for the compensation scheme.
However, funding classes are capped at £240m, so the excess beyond that figure will be applied to other types of firms.
In this paper, the FCA said: “We have acknowledged that the current cost of the FSCS levy for certain firms is too high, especially at a challenging time for all businesses.
“We are proactively taking action to tackle increasing regulatory costs through a stronger focus on firms and individuals who do not meet the required standards.”
The FCA said this will include a “firmer approach” to firms applying for authorisation, as well as making better use of data and intelligence to identify harm caused by authorised firms.
“In the specific area of consumer investments we are aiming to reduce the harm which consumers can suffer with a view to, in turn, reducing the redress liabilities which can give rise to FSCS claims in the longer term.
“We also want to work towards a system where firms which cause redress liabilities end up paying more of the bill before recourse is needed to the FSCS. This would be fairer and would further incentivise firms to achieve good outcomes for consumers. It would benefit firms of all sizes.”