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Mortgage adviser FCA bills will be ‘significantly less’ as high-profit firms shoulder burden

The total fees paid to the Financial Conduct Authority (FCA) by mortgage brokers will potentially rise by 3.5 per cent to £19.1m in 2022/2023, but the rate charged to individual firms will fall.


The FCA’s regulated fees and levies paper published last week, proposed that the rate of fees paid by firms in the A.18 home finance providers, advisers and arrangers block, earning more than £100,000, will reduce to £10.072 per thousand or part thousand pounds of annual income, down from £11.337. 

A reduction has been made to the money advice levy as well, as the fee charged to mortgage advisers will drop from 17.7p per thousand pounds of annual income to 13.5p. 

Rob Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI), said the higher overall levy against the lower individual fee was down to mortgage firms seeing an increase in turnover. 

Sinclair said turnover in the mortgage sector had risen by around eight per cent since last year and added: “Firms who have been successful will continue to pay more while the less successful firms will pay less. This makes it a bit fairer.” 

“I always worry about the overall level of FCA, FSCS [Financial Services Compensation Scheme] and FOS [Financial Ombudsman] fees, but the good news for mortgage firms is that their invoice this year will be significantly less than last year. The FSCS costs are lower, FOS will be slightly up and broadly speaking, the FCA levy will be down for smaller firms because they’ve consolidated the consumer credit fee into the minimum fee.  

“They’ve not swung the axe at the mortgage world, but other sectors will be hit. We’re still concerned about where we are with things like crypto and funeral homes where we’re being asked to pick up the initial costs to bring these firms into regulation, but they’ve got to get the money from somewhere and those firms can’t always afford to pay it upfront,” he added. 

Mortgage intermediaries have been excluded from contributing towards the recovery of crypto asset costs and responses to the FCA’s consultation pointed out that they are not subject to money laundering regulations. 


AR fee revision

Other feedback to the regulator’s consultation related to the increase in annual funding requirement (AFR) fees for appointed representatives (ARs). 

The FCA said there were three comments on the proposed rates for ARs which argued that increases were “unacceptably high”. 

In the regulator’s consultation paper which was published in April, it suggested raising the levy by 14.8 per cent to £287 per AR firm. 

Other feedback stated that the nearly 15 per cent hike had been “sneaked in” to the paper without comment while another said the FCA board minutes for 24 March did not mention the rise, suggesting the board was not aware of it. 

Another response said the increase had been “dropped into the consultation paper without any context”, which displayed a lack of transparency particularly because the fee applies retrospectively from 1 April. 

The regulator responded, saying the AFR for this block was increased by 7.9 per cent after accounting for inflation and AR contributions to wider regulatory costs. It said rates had been further “pushed beyond that” to nearly 15 per cent because of an 11 per cent reduction in the number of AR firms. The regulator said this would not have affected the total recovered but affected the distribution of costs between fee-payers. 

After considering the feedback received, the FCA has decided to treat AR fees the same way it treats other flat rates. Also taking inflation into account, it has now proposed that each AR firm pays £266 instead. 

Sinclair welcomed the halving of the AR levy increase, saying the regulator “reduced it from the excessive, gross levels that they were”. 

He also said he was waiting for the FCA and Treasury’s review into ARs in Q3 this year as “that will help us to see exactly what they think they need to do and why they need money. That will be useful if we can see more of the detail.” 

Rob Clifford, chief executive of Stonebridge, said following the consultation, there had been movement from the regulator, as expected.

He added: “However, there is a rather large caveat here. There was the suggestion in April that the FCA would, following feedback and criticism, adopt a fallback position, giving the impression these increased fees were a ‘good deal’ for practitioners, when the facts appear to be that they are still significantly above last year’s rates. Hence, fees for network principals like ourselves are now £266 per AR firm, having been marginally reduced from the proposed £287 in April. However, they continue to significantly rise year-on-year. One saving grace for hundreds of broker firms is that we do not typically pass FCA fees onto our members – we absorb them, as a reward for loyalty.

“I’m aware that Robert Sinclair at AMI, and other industry commentators, rightly dismiss the assumption that mortgage and protection brokers can continue to pay more each and every year. The ‘regulatory dividend’ that has been promised since statutory regulation was introduced still seems highly questionable, yet the FCA’s running costs never abate. It means that honest and diligent mortgage brokers pay more every year, which is somewhat baffling given that our sector is known to be exceedingly low-risk.”

The total proposed levy for AR firms for 2022/2023 is £7.1m, a fall from £7.2m. 

The FCA said it was reviewing its long-term funding arrangements for developing policy towards ARs, ongoing regulation and enforcement where it expects to “intensify activity” in line with its published business plan and strategy. It will review options for cost recovery in the fees policy consultation paper which will be published in November. 

The number of AR firms is estimated to have stayed flat on 2021/2022’s figure of 3,266, while the number of mortgage advice firms is estimated to have decreased by 1.5 per cent to 5,578. 

A flat fee levy of £85 is also payable to the Financial Ombudsman Service. 

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