Seven financial advisers fail to pay industry funding levy

Financial advisers will still only pay 50% of costs of funding the regulator in 2017

 

Despite rapidly rising costs and Ministerial approval for an increase, the taxpayer will continue to subvent the costs of regulating mortgage brokers and financial advisers to the order of 50 per cent this year, at a cost of some €3.9 million.

It means that retail intermediaries will be the only industry category to pay a reduced rate of levy, with all others increasing their contribution from 50 per cent to 65 per cent for 2017.

This comes despite rapidly rising costs. According to the regulator, due to an “increasingly onerous regulatory mandate” costs for overseeing retail intermediaries, which include debt management companies, insurance brokers and investment advisers, will rise from €5.9 million in 2016 to €7.8 million in 2017, largely due to increased consumer protection costs.

These will rise from about €4.5 million in 2016 to about €5.5 million in 2017. It means that the costs borne by financial advisers will rise to €4.4 million this year, up from €3 million in 2016, including a shortfall of €0.5 million for 2016. Across some 2,400 advisers, it means that the minimum levy this year will be €932, plus variable levy of 0.22 per cent of turnover for those companies with revenue of more than €300,000. So, a business with turnover of €400,000 for example, will pay €1,152 in 2017, while a business with turnover of €1 million will pay €2,472.

Minimum levy

According to the Central Bank, 90 per cent of advisers will pay the minimum levy.

However, it remains firm on its intention to increase the subvention rate to 65 per cent in 2018, and to 100 per cent thereafter.

“Bank cannot compromise on its regulatory mandate and will continue to move towards full industry funding,” it said in a recent presentation to the sector, although it added that it would seek to recover more from the variable levy next year, in order to keep the minimum levy low.

Ministerial approval is in place for the first phased increase, moving from 50 per cent to 65 per cent in 2017, although approval is needed again for further increases in future years.

Ciaran Phelan, chief executive of Brokers Ireland, said that doubling the costs to 100 per cent would be a “huge burden” on a small intermediary, adding that it would also serve as an additional barrier to entry. His major concern however, is the lack of oversight in how the regulator spends its money.

“The Central Bank is not very transparent when it comes to its costs,” he said, adding “There is no independent oversight of the running costs of the Central Bank and that is fundamentally wrong.”

Non-payment

Since the introduction of industry funding there have also mean a number of instances of non-payment. According to the Central Bank, seven judgements against retail intermediaries have been registered so far, and of these, three have entered into payment plans, while four have been published in Stubbs Gazette.

“Non-payment is pursued through civil debt collection processes to avoid the paradox whereby compliant firms make good all shortfalls!” the regulator said.