29 May 2013
Andrew Power, partner at Deloitte, was recently on record as saying that “increasing regulation and its associated cost will certainly exacerbate the trend that sees advisers dealing with wealthier and wealthier clients as they need a certain weight of assets to get an income flow”. He is also of the view that “there may also be a back-lash against regulation”.
The Financial Conduct Authority (FCA) recently told advisers in the A13 fee block (which covers most adviser firms) that they face an increase in fees for 2013/14 from £32.8m to £37.9m.
We also heard that firms regulated by the FCA would plug the Financial Services Authority (FSA)’s £107m pension deficit under the new regulatory structure.
Concern continues to mount regarding the costs of regulation upon adviser firms, most of whom are small businesses. As an industry, we are told that every effort is being made to ensure that regulatory costs are contained, that ideally budgets will be carefully considered, and that the FCA will exercise care in how it spends the money placed at its disposal by the firms it is empowered to regulate.
So, on seeing the new logo role out on the 1st April, it crossed my mind that perhaps the date was an omen for what is to come, an ‘April Fool’ but one that costs a lot.
To test that theory, we made a Freedom of Information request to the FCA asking:
"I would be most grateful if you can confirm the costs incurred to create and establish the brand identity of the FCA up to its April launch.
This should ideally relate to the creative, design and production costs. In particular we would request details of the cost of the logo design, the website design and build, the rulebook and all stationary costs to facilitate the creation and launch of the FCA in April."
To put some contextual flesh on the bone, in the view of some well-placed industry experts, “the functionality of the FCA website seems fairly basic”. It is pretty much a re-skin of the FSA site, the rulebook has rolled over too. Some editing would be required, for example changing references from the FSA to the FCA, something that is a simple ‘Word’ function in many ways but on a large scale.
The staffing of the FCA is mostly a transfer from the FSA, the address is the same.
I am very pleased to report that the request was dealt with promptly, politely and we have now received the reply that we are sure will be of interest to the industry as a whole and small adviser firms in particular.
As a new regulatory organisation, the FCA states that it “needs to ensure that consumers, firms, markets and its staff understand its objectives as well as perceive the FCA as a new regulatory body. To this effect, we have developed a new brand identity to reflect our new objectives and how we will engage with consumers and firms differently”. The resulting logo design is clear and simple.
But should the exercise cost £1,061,423 including VAT? At nearly 3% of the 2013/14 adviser fee pot, is this money well spent?
The cost of the logo design:
“We have spent £48,000 on designing the FCA brand identity, £91,500 on developing the FCA brand guidelines, £57,000 on registering the new logo and on legal fees to resolve registration issues”.
The website design and build:
“The cost of the new FCA website, which included its design, build, architecture, code and content changes was £723,576.81”.
“We have interpreted ‘rulebook’ as the FCA’s ‘Handbook’. The total expenditure for this work which involved the design, legal fees, development and build of the new site was £101,000”.
All Stationery costs:
“We spent £40,347.68 on the design and production of business cards, note pads and pens. It is worth noting that stocks of FSA stationery were monitored and run down and replenished with new FCA’s stationery in the lead up to 1 April to minimise costs”.
A spokesperson for the FCA commented: “Several agencies submitted quotes for the work on both the brand identity and website design and in both instances we chose the agency who offered the best value for money. All this was delivered on time and on budget.”
As Mandy Rice Davies said they “would say that wouldn’t they”?
One agency, GASP, did exactly that and said “I find a figure in excess of £700k outrageous. You can achieve a lot with that type of digital spend…the cynic in me has a good idea what has happened here.”
Marketing Director of Panacea Adviser, Sarah Paul, who has over 15 years experience working within e-business and marketing functions for several major financial services firms commented, "For a website with no apparent tools or interactivity, I find it incredible that over £700,000 would be spent on a basic rebrand".
Simon Ryan of Social Advisers, who has considerable experience at corporate level working on rebranding projects, said “For the extent of the changes that were required for a simple refresh from the FSA to the FCA and looking at what they have delivered, I'm not convinced the FCA will be able to claim they have received value for money. The website costs would raise alarm bells for me”.
The news of this spend comes in the same month that David Geale, the FCA’s head of investment policy commented that “Forcing platforms to justify charges will reduce costs”.
He said “We are concerned that the current way that platforms are funded is opaque and makes it difficult for customers to understand how much they are paying for the platform service or to compare platforms”.
Well, Mr. Geale, I think the industry is having difficulty understanding how much they are paying to be regulated – both in the past by the FSA and now the FCA.
In the world of regulation, a spend of £1.06m is not a lot of money – yet that is precisely the problem. The old adage about the pennies looking after themselves could not be directed at a more deserving target. After all, if this figure can be spent and is, for example, 30% more than it need be, the big question posed is where else too much money is being paid.
Perhaps the Treasury Select Committee (TSC), who has been advised of this spend, should conduct an enquiry into the regulator’s processes regarding infrastructure spending and ensuring value for money by way of quality at the very best price.
The time has come to stop the seemingly profligate spending of other people’s money, consumers’ money, in fact, as they are ultimately the ones who end up paying.
Or, is it the case that as now it is only the wealthy who have easy access to paid-for financial advice, that who pays the piper and how the piper acts really does not matter?