Key regulatory facts - about the cost of regulation

1. The Financial Services Authority (FSA)

The FSA is the independent regulator of financial services. It requires us to give you this Key Fact document when advising on some savings and investments. You may use this information to compare value for money, to shop around and to decide which firm to use. However the Key Fact Document does not go far enough in the disclosure of REAL COSTS. It is certainly true that everybody and anybody wants to discuss IFA remuneration and value for money - so let’s just extend commission disclosure to encompass regulatory disclosure. 

2. The Regulatory costs are disclosed on the Key Facts Document below

3. What are your payment options?

You have none because the regulatory is unaccountable and operates above the law. The TRUE costs are built into the product by way of implicit charges and costs and the regulator does not disclose these.

4.

Table 1 – THE TRUE COST OF ADVICE!

HOW MANY STAFF DOES THE FSA & FOS HAVE?
In 2003/04 an average of 2,303 people were employed by, or contracted to work for, the FSA. In December 2004 the Financial Ombudsman Service reported a total employee complement of 950, compared with the 550 staff employed two years ago. This represents a 72.73% increase over just two years. Thus in we have total 3,253 staff and growing! At least this army will have a vested interest in maintaining an industry to regulate. Maybe the aim is a 1:1 regulator to regulated? 

WHAT IS THE CHIEF EXECUTIVE’S SALARY?
John Tiner 2003/04: £471,656 (During the 2003/04 reporting year he was managing director from 01 April 2003  21 September 2003 and CEO from 22 September. He previously worked for a now defunct firm of accountants that was involved in the Enron debacle.

WHAT IS THE CHAIRMAN’S SALARY?
Callum McCarthy 2003/04 £223,769 (Callum joined the FSA on 22 September 2003). He previously regulated GAS!

Previous chairman Howard Davies was paid £193,066 for the period from 1 April 2003  21 September 2003, he previously worked for McKinsey, a firm of management consultants who thought Enron was a good thing, he also wrote articles about the ‘con’ in consulting.

WHAT IS THE DIRECTOR OF ENFORCEMENT’S SALARY?
Margaret Cole director of enforcement gets paid just over £300,000, she was a lawyer and thankfully she cannot be a Freemason.

FSA HAS FINED THE INDUSTRY £43,738,000
Where did this all end up? Three guesses…

HOW MUCH DOES THE FSA MONEY LAUNDERING RULES COST & SAVE?
Money Laundering Rules cost 400m to recover 46million! Yes that's right a cost of 400m to save 46m. Imagine if an IFA showed a set of accounts to the FSA with solvency margins like that! The industry is wasting millions of pounds to comply with the Financial Services Authority, but the reality is that this is little more than box ticking.  AN EXPERT in financial crime branded Britain’s attempts to combat money laundering as pathetic. In The Times 15.03.05 Mike Adlem, who trained with the fraud squad before embarking on a 15-year career investigating financial crime and advising banks, estimates that the cost of recovering that £46 million was more than £400 million. Surely we can get better value for money but if we can't then those responsible need to account for their expenditure just as the IFA is made to account for his income?

TOTAL COST
A survey from the British Chambers of Commerce suggests the cumulative cost of regulations introduced since 1998 is £38.9 billion.

HOW MUCH CAN WE EXPECT TO PAY FOR THE FSA FINAL SALARY PENSION?
In its latest annual report, the Financial Services Authority said the deficit in its in-house final salary scheme stood at £80m. However, if it comes to the crunch, the FSA can always make up the shortfall by increasing the fees that it charges regulated firms. Did you know the FSA has  statutory powers to raise fees to allow them to meet pension shortfalls?  Also see FSA fines above.

Notes:

1. Most of the figures are based on actual data supplied via the FSA. The figures will from time to time be updated to mirror the rapidly expanding costs of the FSA.

2. Where a firm sells its own products it must calculate its figures according to FSA guidelines.

5. Further information

35% of everything we earn goes towards the following:

· Printing the 23,000 pages of missives created by the FSA and paying someone to read them in an attempt to make sense of them

· Paying for Professional Indemnity Insurance that is a total waste of money.

· Paying FSA/FOS/FSCS fees that can be spent in any way on anything that takes their fancy.

The cost of commission in a product is on average 3% of the investment, the cost of regulation in a product is on average 9%, that is before the IFA spends 35% of the commission to comply with the regulations. This is expensive for you the ‘consumer’ or in my case my client.

If you need any more help or information

· ask your MP why this is allowed to continue

· visit http://www.fsa.gov.uk/consumer