The Association of Professional Financial Advisers (APFA) has published its second annual Cost of Regulation report alongside a regulatory costs disclosure template for advisers to use in their communications with clients.
APFA’s research estimated that on average, small to mid-sized firms spend 12 per cent of their income on direct and indirect regulatory costs. Of this, 3 per cent is spent on direct fees and levies and 9 per cent on indirect costs including compliance, reporting and managing time taken to deal with regulation. These are the same proportions as last year. Given the current size of the market and number of clients, this means that the average client is paying approximately GBP160 each year towards the cost of regulation.
Chris Hannant, APFA’s Director General, says: “Based on advice firm responses, our research shows that each client is still paying hundreds of pounds every year to cover the cost of regulation.
“At a time of heightened policymaker concern about what measures are required to broaden consumer access to professional financial help, it is vital that radical steps are taken to reduce costs and make advice more affordable to those that need it.
“APFA will continue to urge politicians and regulators to use the Financial Advice Market Review as an opportunity for reform. Advisers can be more proactive and transparent in highlighting to their clients how much of their bill is simply to cover regulatory costs.
“This is why our Cost of Regulation report this year includes a costs disclosure template. Advisers can use this to raise consumer awareness of the impact of regulatory fees and levies as well as the expenditure firms have to undertake to keep up with continually-changing regulation.”
