Compliance with mortgage regulation will be top of the agenda come Mortgage Day on October 31.
Yet amazingly many brokers believe joining a network as an appointed representative is an easy way out. There is a false assumption that if you are directly authorised, the Financial Services Authority will be crawling all over you but this is simply not the case. In fact, networks are likely to be just as rigorous in terms of policing their ARs as it is they who will have the most to lose.
After all, who is the FSA going to throw the book at – the introducing AR or the network for its compliance failure? If you are planning to go down the AR route, be prepared to have your actions rigorously monitored.
Mike Fry, director at Cheshire-based IFA Halton Insurance Service, was previously an appointed representative under the DBS network. With the coming of mortgage regulation he has decided to go it alone, becoming directly authorised with the FSA.
“Joining a network certainly isn't an easy option,” he says. “Sometimes you can find it's actually harder in terms of the standards the networks set. They can be extremely strict.
“Networks really come into their own for brokers who are up-to-date with exams, criteria, whatever. Then you will be better off with a network as it will look after all that.”
The mentality of a lot of ARs, he adds, is that once they've signed up with a network they have done their bit as regards compliance. But the reality is that brokers will have to face regular check-ups every six months coupled with examinations every year.
“People seem to think that they're just joining a network for safety,” adds Fry. “If brokers have been regulated before they'll know what to expect but I imagine it will come as a shock to the system for a lot of people.”
In terms of bureaucracy, whichever route brokers take, the controls and strictures that regulation will bring are unavoidable.
As Linda Will, managing director at Accord Mortgages, explains, for mortgage brokers safety is a state of mind. The real crunch is whether brokers feel safer in relinquishing control of their business to a third party or immersing themselves in a culture of regulation, while at least retaining direct control of their company.
“You're still going to have to do a lot of compliance whichever way you choose,” she says. “It's a choice between independence and a willingness to take responsibility and steer your own ship your own way, as against saying 'actually I'd rather have someone else do the worrying for me and stay as I am'. In the latter case becoming an AR would suit you better.”
While the AR route should in no way be seen as the soft option, brokers must have a realistic perspective about which course will better suit the 'psyche' of their firm or their personality.
Both options will require brokers to change their business practices, the ways they hold information and how they justify the choices they make on their clients' behalf.
For many, regulation will be hard. But then who said making money should be easy?