APFA: proposed guidance guarantee levy “unfair to advisers and consumers”
18 September 2014
The Association of Professional Financial Advisers (APFA) has responded to the FCA’s consultation on retirement reforms and the guidance guarantee, calling for changes to the proposals for a levy on the financial services industry. APFA believes the proposed levy will impose a disproportionate cost on the financial advice profession and will increase costs for consumers as a result.
Chris Hannant, Director General at APFA, commented:
“We support the move toward greater flexibility for consumers at retirement, and we believe that professional financial advisers have an important role to play. However, on the issue of the levy to fund the guidance guarantee, we are concerned that under the FCA’s proposals a disproportionately large amount of the cost will be shouldered by financial advisers and passed on to consumers. This undermines the aim of the guidance guarantee: to encourage people to seek help with their retirement planning.”
The Pensions Advisory Service estimates that the annual cost of providing the guidance guarantee service would be £15-20 million. Under the FCA’s proposals, an annual levy of £20 million would cost advisers between £4 million and £6 million. Retained profits in financial adviser firms in 2013 totalled £128 million1 - therefore a levy of this size would represent between 3-5% of advisers’ retained profits.
Chris Hannant added:
“The FCA’s current plans are unfair on advisers, and ultimately, unfair on consumers. It’s vital that when finalising its levy the FCA uses a method that reflects the relative size of different sectors and the benefits they are likely to gain. We think a fairer method would be to allocate the levy on the basis of firms’ turnover, utilising information already held by the regulator. This will ensure that contributions are distributed proportionally and fairly across the industry.
“We will continue to work closely with the FCA and other parties over the coming weeks and months to ensure the best outcome for advisers and consumers.”
ENDS
