Facing FSCS: how are you budgeting in 2013?

‘If, for some reason, the levy disappears we will scale back the compliance cost,’ Killik added.

Based on previous years, Killik expects to spend around 4% of revenues on direct compliance costs, but with management time factored in he anticipates that figure could be as high as 8-10%, which could equate to between £1.2 million and £1.4 million.

While Killik believes strong compliance and processes are positive for wealth management businesses and indicative of good business practice, he takes issue with what he describes as the FSA’s ‘box ticking approach’ and estimates that 50% of his time is currently spent on compliance-related matters.

Advisory firm Alan Steel, meanwhile, is expecting to spend between 5% and 10% of turnover on regulation in 2013. Revenues in 2012 were just over £4 million.

‘Our subscription to the FSA has quadrupled over four years, never mind how much we have to spend on professional indemnity insurance because the regulator has left the industry in a complete mess,’ he said.

The company paid out £83,000 towards its total FSA subscription between April 2012 to March of this year. Within that, around £70,000 related to the FSCS, and it had to make an extra payment of £65,000 on top of that because of the firm’s Keydata exposure.

Looking ahead, finance director Frances Steel said she is budgeting for the FSCS levy but not another interim levy.

Meanwhile, wealth advisory firm jonathanfry plc estimates that around 10-15% of revenues could be attributable to compliance costs.

Risk and compliance officer Marc Granville estimates that suitability will account for the biggest portion of the regulatory budget, followed by RDR and ‘regulatory change’, or rather, responding to change and developments that are coming out of the regulator.