40% of compliance costs spent on FSA fees and levies

A staggering 40% of the wealth management industry's compliance costs is currently being spent on FSA fees and levies, according to research from Compeer.

The benchmarking and research group estimates that up to 10% of income generated by the wealth management industry is being wiped out by regulatory costs,with wealth management businesses spending just as much on non-direct costs, such as management time, as they are on hard compliance costs.The findings have led to calls from senior industry figures for greater co-operation between the regulator and the industry.

Compeer estimates that around 13% of the industry’s total compliance costs can be attributed to hidden senior staff costs, 17% on non-senior staff costs, 31% on direct compliance costs and a staggering 39% on FSA fees and levies, including the FSCS levy.

Front office staff comprised the largest outgoing within the indirect cost portion, with senior management and finance also featuring highly in this category.

Wealth management firms surveyed highlighted suitability as the biggest perceived compliance risk, followed by the retail distribution review (RDR). Financial crime and the restructuring of the FSA came in as joint third in the list of concerns.

Compeer surveyed more than 30 wealth management firms, which manage more than 35% of the industry’s assets.

The RDR represented the most expensive project for wealth firms surveyed, but proved the exception to the rule with non-senior staff costs outpacing those of senior staff – in contrast to Cass, Fatca and capital adequacy projects.