The Association of Professional Financial Advisors has published its third annual report on direct and indirect regulatory costs for advisory businesses in the United Kingdom. Small-to-medium firms now spend 11% of their revenue on costs associated with regulation.

APFA's research estimates that, on average, small-to-mid-sized firms (i.e. those with revenue less than £1 million) spent £32,000 on the direct and indirect costs of regulation in 2015 - an increase from £28,000 the previous year. The costs of fees and levies to be paid to regulatory bodies also went up for nearly every size of firm, with the average fee and levy payout rising by one-third from £6,000 to £9,000 for all firms with less than £1 million in annual revenue. Overall, small to medium firms spend 11% of their revenue on costs associated with regulation. Given the current size of the market and the number of clients, this means that the average client is paying approximately £160 each year towards the cost of regulation.

Chris Hannant, APFA's director-general, expressed his displeasure, adding: "We believe that a substantial part of the increase in direct costs arises from the FSCS [Financial Services Compensation Scheme] levies in 2015. This further underlines the need for a move to a more sustainable funding approach at the FSCS. We will continue to hold the government to account as it implements the recommendations of the Financial Advice Market Review."