FCA proposes 10.4% hike to broker fees block

The 10.4% rise for brokers from the current £31.5m would be ahead of the 8.5% year-on-year increase to the FCA’s overall funding requirement.

Under the proposals being consulted on by the watchdog, brokers will benefit from £2.9m of penalties collected in the current financial year being rebated into the GI mediation group.

We are well underway to achieving our objectives thanks to our talented colleagues and the better use of technology and data across our organisation. 

Nikhil Rathi

With changes to the number of firms in the group and a rising estimated group income, the FCA estimated the tariff rate shift would be 7%.

The regulator flagged that it had recognised many businesses were facing cost pressures.

“We want to ensure our fees are proportionate. As a result, we propose freezing minimum and flat-rate fees to ease the pressure on the smallest firms. We are also freezing our application fees this year,” it reported.

Fees and spend

The fee rates will be finalised in June.

The FCA detailed that the rise in the overall budget was a “below real terms increase”. It listed that changing the UK’s financial services regulation post Brexit in the Future Regulatory Framework will cost £12.7m in 2024.

The spend on information technology systems development and infrastructure is poised to go up by £8m to £58m, and there are the new Consumer Duty costs.

“We will invest £5.3m to ensure that the Consumer Duty is embedded effectively,” the FCA stated.

FOS budget and headcount

The regulator also confirmed that it had approved a budget for the Financial Ombudsman Service of £234.2m.

Next year’s FOS budget was first floated in December with a reduction on the current year spend and a levy freeze.

The consultation on fees came alongside the regulator issuing the FCA Business Plan setting out its programme for the next 12 months as it moves into the second year of its three-year strategy.

The FCA noted that it had been recruiting to support its “growing” remit and to deliver its “ambitious strategy”.

Headcount has risen from 3,800 at the start of 2022 to nearly 4,500 at the end of March. Also, it has opened an office in Leeds.

Objectives

Nikhil Rathi, CEO at the FCA, said: “We set out a bold vision last year of what we wanted the FCA to be, and we are well underway to achieving our objectives thanks to our talented colleagues and the better use of technology and data across our organisation. 

“With many consumers across the UK struggling with the cost-of-living [crisis] and markets events causing concern, we have put in place vital changes over the past few years, which means we’re better set up to face these challenges.”

Assertive

Hugh Savill, senior adviser at Sicsic Advisory, analysed that the key message from the FCA Business Plan was consistency and continuity. In his view, there were points in it which should make the GI market sit up and take notice (see box).

“The regulator has stated its ambition to be a more assertive regulator in their three-year strategy last year, and now they intend to do it. The FCA now has the resources to reach your door,” Savill observed.

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