2nd December 2022

Adviser Vulnerability – the ‘Outcomes’

We had heard reports that Directly Authorised smaller adviser firms were under relentless pressure and stress, quite often from the FCA, the FSCS and the rising cost of living. 

Was that true? 

To find out how vulnerable, because it would seem the FCA has not asked, we sought views from our community about their own levels of stress, was it real, what caused it on Adviser vulnerability to gauge the views on FCA support. 

We received 234 responses and will share these with the FCA and the FSCS. But not until you can digest them too along with some of the very powerful comments made.

As with all our research, advisers are very open and willing to write, in one case the answer to one question was some 241 words. The quotes below are verbatim! 

Thanks to everyone who contributed, many advisers are in a very tough space and the regulator need to recognise that fact with care and compassion, not threats or more bureaucratic workloads for the sake of box ticking.

Q1. What impact(s) do increasing energy costs have on your business?

43% stated a significant impact

23% stated seeing some impact

34% stated very little or no impact

Many of the 34% that stated very little, or no impact also commented that they work from home or had a fixed rate but had concerns about this changing when the fixed rate ends.

The 43% that commented on significant impacts also commented on how the increase in outgoings but fees staying the same have a huge impact on reduced profits. Additionally, there is a reluctance to recruit and reduce face to face appointments due to rising fuel costs.

• “Over 500% increasing in our electricity costs have been quoted.....and that is the lowest cost available to us”

• “Extreme impact as with any other UK business. 200% increase in energy costs. We are faced with increasing costs from every angle of business and ultimately we have to make a decision to increase costs to the consumer”.

• “As with all businesses the rising costs, not just energy, but also Compliance and FCA Fees are giving rise to some major concerns.” 

Q2. Are clients less willing or unable to pay fees due to inflationary pressure?

Yes – 39%

No – 28%

Unsure – 28%

N/A – 4% 

• “More and more are asking probing and often quite rude questions, but usually those who have not been clients long or the ones which have not bought into the process or clients that are new”.

• “Fees have never been an issue with our clients, but we have noticed a reluctance to part with cash in expectation of having to draw on it either for themselves or to help family members out”. 

• “This is because I have not increased my fees even though I am paying more for FCA fees and PII. If I put up my charges I would probably do less business as I work in the north not in LONDON”.

Q3. What impact does the FSCS have on your business and cashflow?

Huge/significant impact – 88%

Some – 4%

None – 8% 

Most comments focussed the uncertainty of future costs, which often have to be passed onto clients with increased fees.  One comment that was typical of the majority stated “Stress and sleepless nights from [a] governing body who just wants to kick us in these difficult times. I honestly couldn’t remember the last time the FCA helped advisors.”

Other comments focussed on the constant surveys which detract from time dealing with clients.

• “Ridiculously high cost is threatening my business. If the FCA did its job correctly the payments from the FSCS would be dramatically reduced saving firms a small fortune!”.

• “It does not help having to carry a greater reserve and it causes sleepless nights due to the randomness of a very high potential hit against the firm which is unpredictable. It means that we have to spend more on I.T. and compliance to try and mitigate”

• “Stress and sleepless nights from governing body who just wants to kick us in these difficult times. I honestly couldn’t remember the last time the FCA helped advisors”.

Q4. Can your firm always pay all its regulatory fees on time? 

Yes – 96%

No – 1%

Unsure – 3%

Some of those that stated ‘No’ commented that they have had to take loans to cover the fees. 

• “Because the principal's incomes are reduced to ensure it is paid”.

• “But this always impacts on my profits so I earn less. Why is it costs go up every year. Can I suggest a reduced levy for working in the north and being a sole trader”.

• “On a matter of principle.  if I thought we could get away with paying them into a suitably protected account elsewhere as a protest I would, perhaps as an industry we should consider this but it would require every company to joint in to have any effect on the regulatory regime”.

Q5. Do you believe that the FCA fee consultations are genuine or a box ticking exercise?

Yes, a genuine exercise – 0%

No, a box ticking exercise – 79%

Unsure – 21%

This is very worrying, not one single respondent thought consultations were a genuine attempt at seeking out opinions and views that would be listened to.

• “Having said which, meeting the likes of Sacha Sedan and what they are doing with respect to the labelling of Sustainable Investments is good. The FCA is trying to provide a better service, but it is glacial”.

• Whilst it would be nice to think we complete these damn things on a regular basis for a purpose because of the way we keep our accounts and deal with our income the results the FCA get from us are almost meaningless unless they look over an entire year which I am fairly certain they do not”. 

• “For most FCA consultations they have already made up their minds before consultation even takes place”.

Q6. Is your current company morale?

Very positive – 7%

Positive – 23%

Neutral – 35%

Negative – 26%

Very negative – 10%

With some 36% on the negative spectrum the FCA should be concerned but are they?

“Completely fed up - likely to leave soon”.

“Everyone, employee and Directors are faced with the same economic environment and factors.  Security of business and personal finances are lower as a result.  Business and employment uncertainty are high”. 

“As a small DA firm we try to keep our own morale up, but external factors outside of our control impact upon it.  As well as providing advice, we are now expected to be life coaches and councillors and able to identify any potential vulnerability a client may have”.  

“The FCA are very much like heavy handed big brothers - pay us or else- also VERY IMPORTANTLY THEIR SCHEME RETURNS ARE THE MOST STRESSFUL PART OF OUR JOB AND THIS CAUSES MENTAL ANXIETY EVERY 6 MONTHS”  

Panacea Surveys, Business Development