This follows a recent study which claims as many as three in 10 advisers could leave the industry within the next five years,
The Financial Conduct Authority (FCA) has announced a fee increase of almost 6% and when combined with the rising FSCS levy, advisers will see overall fees rise by 10%, in a period of negative inflation. This is enough, according to Richards, to necessitate an urgent review, given the inevitable consumer impact.
He said: “Regulation is a key component of providing protection and influencing good outcomes for the general public, but it is becoming increasingly unreasonable to continue with an outdated funding system that levies unfairly against a smaller number of contributors in a totally different post-RDR landscape.
“Regulatory fines were originally intended to influence behaviors and ultimately help fund regulation. They should also be providing a dividend for the most compliant, who should pay the least. Instead, all fines now go to the Treasury and the increased cost burden is being shared by a reducing pool of advisers.”
According to the PFS, advisers are responsible for a very small percentage of the overall complaints made, yet they are disproportionately saddled with a misrepresentative share of the resultant fines.
Richards added: “The industry must, of course, make a proportionate contribution to regulation and consumer protection, but it is time to objectively review whether or not the current system is fit for purpose and explore alternative options such as re-directing fines and perhaps the introduction of an investment, or policy levy.
“The current system is also very opaque from a consumer perspective, with regulation, FSCS, MAS and Pension Wise all appearing to be free. An additional benefit and objective therefore should be greater transparency for consumers, with costs visible from the outset instead of them being bundled into firms’ charging structures.
“As it stands at present, the uncertainty regarding risk and costs is driving advisers to consider an early exit and restricting the flow of new blood into the profession. It is also driving the wrong behaviors, with new entrants trying to meet the growing consumer need for access to advice by operating non-advised or non-regulated models.
“With the implementation of the new pension freedoms and the anticipated increase in consumer demand, we need to address this issue sooner rather than later.”