The Personal Finance Society, the biggest professional body for Financial Planners and Paraplanners, has called for more ‘proportional’ regulation by the FCA under its new strategy to avoid killing off parts of the advice sector.
The PFS made the comments in its initial response to the FCA’s new three year business strategy published this week.
The FCA says its new three-year strategy will prioritise resources to prevent serious harm, set higher standards and promote competition.
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The PFS says it supports the move but regulation must be proportionate and fair, particularly on smaller firms, to avoid squeezing them out of the sector by imposing higher regulation and compensation costs.
Matthew Connell, director of policy and public affairs of the Personal Finance Society, said: “The FCA wants to ensure firms have adequate capital and reserves to cover any potential liabilities should they fail. The Personal Finance Society will be working closely with the regulator on how it can strike the balance between ensuring firms most at risk of collapse hold sufficient reserves to compensate their customers in the future if necessary.
“We will be scrutinising the FCA’s plan to target its interventions at the businesses they deem to have weak financial resilience that they consider are likely to cause material harm if they fail. As the Personal Finance Society has long stated – we do not want to reduce the amount of compensation consumers receive for unsuitable advice. What we want is a system of compensation that does not restrict access to advice so we will be engaged with this consultation to make sure what replaces it is an improvement.”
Mr Connell said PFS members were well aware of the pressures regulation places on their firms and that it often differs greatly depending on size, focus of advice activity and the historic approaches taken by firms.
He said: “A more proportional approach to regulating small firms would be a welcome sight and the Personal Finance Society will engage with the FCA on what this new approach to regulation will mean for our diverse membership.”
This week the FCA published its three year business strategy and fee plans. Under the plans the regulator will publish performance metrics for itself and the sector for the first time as it raises its annual funding requirement by 4.3%.
The FCA’s annual funding requirement for 2022/23 will rise to £640.1m under the plans. For Block A13, which includes most Financial Planning firms, annual fees will rise 5.2% year-on-year to a total of £82.3m for 2022/23. This is lower than the £86.5m initially proposed by the FCA.
Minimum fees for advisory firms will rise to £1,750 for 2022/23 from £1,151. There will be a further rise to £2,200 for 2023/24. Appointed representative fees will rise 3.9% to £3,453.
To improve regulation the FCA will add 80 new roles to help it shut down problem firms faster.
Last July, in a major speech, CEO Nikhil Rathi committed the regulator to becoming, “more innovative, assertive and adaptive” with a pledge to transform the FCA into a data-led organisation.
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