The UK representative body for financial advisors has published its annual cost of regulation report alongside a regulatory costs disclosure template to use for client awareness.

Clients of financial advice firms are paying hundreds of pounds every year to cover the cost of regulation, according to new research by the UK's Association of Professional Financial Advisers.

London-based APFA urged advisors to highlight regulatory costs to their clients. Its research estimated that, on average, small to mid-sized firms spend 12 per cent of their income on direct and indirect regulatory costs. Of this, 3 per cent is spent on direct fees and levies and 9 per cent on indirect costs including compliance, reporting and managing time taken to deal with regulation. These proportions are the same as last year, it noted, and mean the average client is paying around £160 ($240) each year towards the cost of regulation.

“At a time of heightened policymaker concern about what measures are required to broaden consumer access to professional financial help, it is vital that radical steps are taken to reduce costs and make advice more affordable to those that need it,” said APFA’s director general, Chris Hannant.

In its new cost of regulation report, the association said it had included a costs disclosure template for advisors to use to raise consumer awareness of the impact of regulatory fees and levies as well as the expenditure firms have to undertake to keep up with continually changing regulation.

“APFA will continue to urge politicians and regulators to use the Financial Advice Market Review as an opportunity for reform. Advisors can be more proactive and transparent in highlighting to their clients how much of their bill is simply to cover regulatory costs.”

The report was based on a survey of 395 advisor firms in the UK between June and September.