The financial watchdog should raise its charges on the firms it regulates in order to save the investment industry millions in bail out levies, a leading money manager has claimed.
Jamie Matheson, the executive chairman of Brewin Dolphin, said the Financial Services Authority (FSA) should spend more on boosting its regulatory regime in order to prevent the failure of firms such as Keydata, which collapsed owing investors £450 million.
As a result of the failure of Keydata, investment management firms and IFAs, including Brewin, have had to pay £326m through the Financial Services Compensation Scheme (FSCS) to reimburse investors. But Matheson insists that paying higher annual fees boosting the FSA’s abilities to crack down on rogue investment firms would be “spending a little to save a lot”.
“The important thing is to try and prevent a Keydata in the future,” he said. “The position of the regulator can be difficult because they have limited resources. If they had enhanced resources to stop this sort of thing, it would be good for everybody.
“Let’s be clear – our fees [paid to the FSA] are only 10 per cent of our total regulatory bill. A small increase in those fees offsets a big increase in our regulatory costs, that is spending a little to save a lot – I’d be on for that.
“It is important that people understand that the FSA’s fees aren’t everything. Frankly, if they went up a little to ensure they had enhanced resources and that saved a lot more – who loses out of that?
Brewin Dolphin confirmed it paid a further £6m into the FSCS this year, up from £600,000 last year. Matheson added that the payment was “spilled milk and there is just no point in crying about it”.
The payment hit the firm’s pre-tax profits, which fell 27 per cent to £21.9m in the year to 30 September, against £30m last year.
Matheson said the firm had performed “not badly in stormy times”, as funds under management rose 3.4 per cent. Total managed funds reached £24 billion in the year to the end of September, up from £23.2bn last year.
The growth was driven by discretionary funds, which rose to £15.6bn from £14bn in 2010. About €900m (£768m) of this came following the firm’s acquisition of Dublin-based wealth manager, Tilman. The rise in discretionary funds was offset by an 8.7 per cent fall in advisory funds to £8.4bn.
The firm is undertaking a three-year review, which will see it offer “transparent” fees to clients and will make the firm “leaner and fitter”, Matheson promised.
The firm will pay a final dividend of 3.55p per share, bringing the total dividend for the period to 7.1p, in line with last year. Brewin Dolphin’s Scottish operation operated under the Bell Lawrie banner until 2009.