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FCA review of broker/lender relationships necessary: Smee

The director general of the Council of Mortgage Lenders believes the relationship between brokers and lenders should be examined as part of the FCA’s study on competition in the mortgage market.

Paul Smee, who will step down from the body once the CML is merged into UK Finance this summer, tells Mortgage Strategy that questions will continue to be asked about the relationship if it is not analysed by the regulator.

“I accept an argument that says: ‘If 70 per cent of your distribution is going through a particular channel, you want to make sure there are no competitive problems,’” says Smee.

“I’d rather know now than go back and undo things. It’s better to look and see if the structure is working now.”

The CML boss thinks that, although nothing of note may emerge from such a study, it would be best to carry it out.

“I’d like to see a critique – even if it concludes that everything is as you would hope,” says Smee.

“If you don’t have that critique, there will always be questions continually asked. So if they say ‘This is how it works and that’s broadly alright,’ that is where I’d hope they end up, but I think the exercise should be carried out.”

The FCA is examining broker procuration fees as part of its study, but Smee adds that a ban on these is not the way forward for the market.

“You have to pay for distribution, there’s no doubt about that,” he says. “I think saying things like ‘Let’s ban proc fees’ is silly as it’s a convenient way of paying for a service.

“What you have to make sure of is that the way in which the system works doesn’t distort the market, which arguably in the past in the IFA market it did.”

Smee adds that he would like to believe there is good competition in the market anyway, and he hopes the study does not lead to “never-ending circles of detail”. But other areas that could be investigated include technology.

He says: “The current regulatory structure is not friendly to tech and I’d like to see some sort of study into how it could be better used. That could also be by intermediaries; this isn’t a disintermediation process.

“That would be a useful area for the FCA to probe and we’ve suggested it to them.”

The CML will be absorbed into UK Finance this summer as part of the merger of six bodies, also including the British Bankers’ Association and Payments UK and Smee says that the relationship with intermediaries will continue to be a key focus for the body.



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  • Carl McGovern 13th June 2017 at 4:35 pm

    A straight forward way of resolving this, would be to simply have all lenders pay the same procuration fee. Under the current system, if the compliance checking is robust, then there should be no bias towards a particular lender, simply because they pay a higher fee. As we all know, different lenders, employ different criteria, so a straight forward case, that will fit most lenders, should be placed with the best lender available for the client. If service is an issue and a lender is discounted for that reason, this is usually easily provable.

  • Daniel Leach 7th June 2017 at 5:20 pm

    There is nothing wrong direct pricing or retention incentives; it’s a commercial decision for lenders and any good advice would factor those in. If an adviser can’t compete it’s because their own proposition to clients isn’t strong enough.

    Saying a commission ban is not appropriate is also questionable. I personally see nothing wrong with applying RDR style remuneration rules to lending and insurance. It’s clearer and removes the possibility for bias.

  • Stuart Gregory 6th June 2017 at 1:40 pm

    Proc fees are pretty much at 2007 levels – I don’t think the regulator’s got a lot to investigate there, it’s not like brokers are getting rich off the relationship! Perhaps the FCA would like to have a word instead about ‘direct’ deal pricing or retention incentives?