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FCA fee block changes lead to 19% fall for advisers

FCA fee block changes lead to 19% fall for advisers

The Financial Conduct Authority's decision (FCA) to create a new fee block will result in a 19% fall for those not holding client assets.

In the FCA's consultation paper on regulated fees and levies proposals for 2014/15, the regulator said it would merge fee block A12, which applies to investment intermediaries who hold or control client money or assets, with A13, investment intermediaries who do not hold client money or assets.

Another fee block called A21 will be set up for firms that hold client assets or money.

As part of this move, the FCA will sub-divide the fee-block further, based on a split between client money balances and custody assets, on the basis of the risk bandings defined in Cass 1A.2.7.

The FCA has said the proposed changes to fee blocks was 'counter-intuitive' given that firms holding client money require greater supervisory resources.

It also wants to target more effectively the recovery of its costs in regulating compliance with client money and assets rules, set out in the Client Asset Sourcebook (Cass).

The change will mean an 18.7% fall in the annual funding requirement for advisory arrangers, dealers or brokers, to a total £68 million. The new A21 fee block is forecast to pay £13.4 million for 2014/15.

'We have to strike a balance between tailoring our fees regime to the full range of business models and keeping it straightforward. We recognise that different firms present different degrees of risk to the protection of client money and assets,' the FCA explained in the paper.

'While creating a new fee-block will always lead to winners and losers in the short term, this does not mean some firms have been historically ‘overcharged’ any more than others have been ‘undercharged’. As we explained in CP13/14, we are recovering the same amount of money from investment intermediaries as previously.

'Creating the new A21 fee-block has enabled us to pool large and small firms together into the revised investment intermediary fee-block (A13) and this has the effect of reducing the blended fee-rate per £100,000.'

The FCA also reminded firms in the A21 fee block that the income they report in A13 should relate only to intermediary activities. 'It is accordingly plausible that they would report a lower income for the new A13 than they used to report under A12,' the regulator added.

The regulator's impact analysis indicated that across all the firms involved proposals would not have an impact on 44% of firms; would reduced the 2013/14 fees for 43% of firms, and  increased fees for 13% of firms.

Overall the FCA's annual funding requirement will rise 3.3% to £446.4 million.

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