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Broker calls for FCA to offer no-claims discount

Broker calls for FCA to offer no-claims discount

The Financial Conduct Authority (FCA) should consider introducing a no-claims discount in order to make regulatory fees better value for money, according to Martin Stewart, director of mortgage adviser London Money.

Martin’s comments followed a letter from the Treasury Committee, which urged the FCA not to increase its costs without an adequate explanation.

“I would suggest that there has to be some sort of reward for advisers that have operated through all the regulatory changes, disclosures and changes to protocol and still never had a complaint of note,” Martin explained.

“You can drive a car and never have a crash and receive a no-claims discount – why can’t we think along those lines with a portion of regulatory fees?”

Martin concurred with Andrew Tyrie MP, chair of the Treasury Committee, who warned that consumers would bear the brunt of increased fees as firms struggle to meet regulatory costs.

“Regulation is sometimes mistakenly taken to be a free good,” Mr Tyrie stated.

“Consumers end up picking up the tab, either in higher prices or reduced services, or both. So the FCA’s costs need to be kept in check.”

Martin added: “It is not practical to continually absorb increased regulatory costs, especially as the majority of people in the industry are compliant and ethical and picking up the tab for somebody else’s mistakes.”

The FCA currently imposes three types of fee for authorised firms: application fees, change to permission fees and an annual fee.

Application fees vary according to what regulated activities will be carried out and the complexity of the application.

Straightforward applications cost £1,500, while the FCA charges £5,000 for moderately complex applications and £25,000 for a complex application.

Meanwhile, annual fees depend on the type of regulated activity, the extent of the firm’s activities and how much it costs the FCA to regulate those activities.

In June, the FCA altered the criteria for its consumer buy-to-let fees following a number of complaints.

Mr Tyrie suggested that although the FCA reduced the costs of its activities for 2016/17, this process should have begun sooner. 

Furthermore, Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, voiced concerns that regulatory fees were making the industry increasingly unattractive for advisers.

“Currently [the FCA] appear to see the industry as their career cash cow.

“They work out what they would like to do, not what they really need to do and then ask the industry to pay up.

“We need to take a careful look to see if these costs are becoming a barrier to entry for those looking to provide impartial advice.”

Robert also argued that the FCA did not justify its levy of £38m to mortgage lenders and intermediaries. 

“In undertaking its risk assessment and producing its business plan for this year, there was no direct mention of the mortgage market … this is surprising.

“…The on-going costs of policy, supervision and particularly competition review are out of control.

“We should pay for top-quality regulation, but the FCA lacks focus and clarity on what it is really there to do.”

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