An IFA is taking the FSA to task over the costs of regulation after calculating the percentage of his firm’s hourly rate that goes to the FSA. Sam Caunt, partner at Northampton-based IFA Kingston PTM, says at least £20 of his company’s average £150 per hour rate is due to FSA regulation and to plan for and cost in the RDR and capital adequacy proposals. The cost is broken down into FSA and FSCS fees, provision for new capital adequacy rules and preparing for and implementing the RDR.

Caunt, who describes his four-adviser business as a “small town, medium client IFA”, says while some of the FSA costs are “more than reasonable”, they are difficult to justify to the end client.

“Just look at it from our client’s point of view,” he says. “Someone who wants pension sharing advice for example can see no perceived benefit to them by paying this burdensome cost and it puts into very sharp perspective the other costs the FSA are concerned about, such as platform charges, which are small by comparison.

“If a client asked me what benefit they receive from paying this additional £20, it is very hard to justify. It is incredible the FSA does not look at regulation from this point of view – how much of an hourly charge is a consequence of regulation.”

Caunt says that, within his average £150 charge, are provisions for the “huge” cost of IT and software, compliance monitoring and due diligence.

He says the FSA’s own treating customers fairly (TCF) rules require that regulatory costs and related expenses are controlled.

“The FSA – or better still an independent auditor – needs to ask whether what the clients pay IFAs for regulation is fair, proportionate and reasonable,” Caunt says.