Robert Sinclair, director of AMI, says some networks may decide to split the extra cost among members.
He says: “Larger networks will see considerable increases in costs, with these trebling in some cases. For example, medium-sized firms with more than 5m in average earnings will see their regulatory fees rise by 114%.
“The FSA estimates that its budget will need to increase 117m compared with last year. This will affect our members. Bigger firms and networks will see huge increases in their fees – some will see them treble. This puts extra pressure on firms just when they don’t need it.”
Sinclair adds: “The failings of the financial system rest with banks and the wholesale markets – it is they who should be forced to pay for their misadventures.” Sally Laker, managing director of Mortgage Intelligence, agrees it is not fair that brokers should have to pay for mistakes made elsewhere in the financial services market.
She says: “If a network is profitable it should be able to absorb some of the cost but it depends on how it structures its charges. Each network has a different model.”
The regulator also plans to cut the fees of over 10,000 small firms – a move that met with little enthusiasm among brokers.
The FSA classes a small firm as one with an income of less than 70,000 a year. Small firms pay around 745 a year at the moment, but this will fall to 701.
The regulator’s proposed fees, which are laid out in its business plan for 2009/10, reflect the amount of resources it plans to dedicate to different types of firms in the year ahead.
Rob Roberts, a senior adviser at Chesterton Grant, says the fee decrease for small firms will make little difference.
He says: “It’s better than a rise but it won’t make much difference. I’m more interested in knowing how the FSA spends all the money it gets from fining firms. I read about it fining some companies millions of pounds – I’d like it to use that money to help us out.”
The FSA released its Financial Risk Outlook last week. This shows a whopping 769 mortgage firms threw in the towel last year – around 9% of the market.
The report also warns networks against taking on phoenix firms. It says principal firms may need to increase the resources they dedicate to oversight and compliance.
It adds: “This includes carrying out appropriate due diligence to ensure the quality of new member firms and avoiding inadvertently taking on a phoenixing firm.”