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Wealth & fund firms holding client assets face FCA fee spike
by Danielle Levy on Oct 31, 2013 at 15:46
The Financial Conduct Authority (FCA) is proposing to create a new fee block for investment firms that hold client money in a move that will see the contributions of these firms spike.
To compensate for this, investment intermediaries which do not hold client assets will see their fees fall.
In a consultation paper the FCA is proposing to merge fee block A12, which applies to investment intermediaries who hold or control client money or assets, with A13, which is for 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 with the FCA acknowledging that these firms will face large increases in fees. The measures would come into effect from April of next year, although the regulator was unable to provide an estimate of a likely percentage year-on-year rise for the companies that will move into this block.
The FCA said it has concerns that adviser firms which do not hold client money, who currently fall under the A13 block, are paying too much. It has calculated that advisers holding client money, in the A12 block, pay a fee of £2.39 for every £1,000 of income, while those who don't hold client money, and are housed in the A13 block, pay £6.89 for every £1,000.
The FCA said this 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 FCA explained: 'Setting up a new fee-block clarifies our cost recovery. It ensures that firms taking on client money and assets permissions pay more than those that do not. It also removes the distinction between A12 and A13, bringing all the investment intermediaries into one fee-block, so it has the additional advantage of simplifying our cost recovery from this group of firms. We are proposing that the Money Advice Service (MAS) would follow the FCA model.'
New fee block A21 will apply to firms whose permissions include the safeguarding and administering of safe custody assets and who hold client money under the client money rules.
The City watchdog said there would be some firms that could be exempt from A21. Namely those with authority to control but not hold client money, or those that only arrange the safeguarding and administering of client assets. As a result, these companies are likely to move into A13 and not the new A21.
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