Advisers must do more to highlight regulatory costs to clients says The Association of Professional Financial Advisers (APFA).
APFA has just published a regulatory costs disclosure template for advisers to use in their communications with clients. The template comes at the same time as the APFA’s second annual Cost of Regulation report.
Research from the APFA shows that on average, small to mid-sized firms spend 12% of their income on direct and indirect regulatory costs. To break this down further, some 3% is spent on direct fees and levies and 9% on indirect costs including compliance, reporting and managing time taken to deal with regulation.
Bearing in mind the current size of the market and number of clients, this means that the average client is paying approximately £160 each year towards the cost of regulation.
Chris Hannant, APFA’s Director General, said: “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.”