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Small companies can look after themselves

Doesn’t Mortgage Day seem a long time ago? But think back to what was the focus of those firms that wanted to be principals.

At the time, these companies’ main preoccupation was persuading the world, and in particular any small firms that would listen, that directly authorised brokers could not exist under a Financial Services Authority regime and that anyone with any sense should join their network before it was too late.

Yet recently I have seen headlines such as ‘FSA to end audit requirements for small firms’ and ‘FSA told to treat small firms fairly’. Of course, where transgressions are noted the FSA should and does take swift and proportionate action, but just look at the FSA website and you will see pages of assistance aimed at small firms.

One of the biggest difficulties for small companies is that the FSA is a passionate believer in the principles-based approach to regulation. It is usually smaller firms that struggle to work with such an approach as they don’t have sufficient resources to create their own rules based on principles. They would prefer to have a rulebook to follow.

And a mortgage intermediary would have had to have lived in the Big Bro-ther house for the past two years not to recognise the FSA’s thrust in respect of Treating Customers Fairly or its insistence that TCF applies equally to small and large firms.

TCF will not go away. It is not a passing fad and will remain at the top of the FSA’s agenda. But even this is not a reason for brokers to bail out and run to a network.

Just look at the FSA website, especially at Doing/small_firms/ge-eral/tc/index.shtml where the FSA has produced a self-assessment tool to help firms see how they perform in relation to important TCF areas and to take action where they identify gaps in their business strategy, culture or processes.

The regulator’s website also includes cases studies showing examples of TCF. During July the FSA added a downloadable pdf called ‘Treating customers fairly – what it means for small firms’. With help like that it is not possible to accuse the FSA of being anti-small companies or anti-DA intermediaries.

To further assist DA brokers, many mortgage clubs promote outsourced compliance services and hold regular meetings with their registered users to help them comply with the rules.

But against this backdrop we have recently seen some networks demanding that the regulator names the four networks that have voluntarily agreed to its suggestion that they stop recruiting.

Why? Nobody is suggesting that these four companies can’t adequately manage the ARs they already have. And nobody is suggesting either that there is a consumer detriment in the four networks continuing to trade with the ARs they have on board.

Maybe some networks have realised that DA firms now know they can cope adequately under the FSA regime and that they are unlikely to persuade them to become ARs. Perhaps they feel they are more likely to recruit ARs from other networks.

Nick Baxter is managing director of Mortgage Promotions and partner at Baxters Business Consultants


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