The news that brokers will have to cough up a minimum of £1,000 to be regulated by the Financial Services Authority will do little to gladden the heart of an industry struggling to get back on its feet after the worst two years in living memory.
For big firms the news is even worse. The FSA has judged that prominent high street brokerages and large networks will have to bear the brunt of the costs.
The Association of Mortgage Intermediaries calculates that for these firms, every £1,000 of annual income they generate will result in them having to pay £10.54 in regulatory fees. Last year, for the same amount of income they paid just £3.71 in fees.
Of course, these companies argue that as they are likely to spend more on compliance and ensuring their advisers don’t stray from the regulatory path they should not be seen as more of a risk. No doubt these costs will eventually work down to the charges of individual appointed representatives – it seems this is one bullet nobody in the industry will be able to dodge.
Many must be asking themselves whether they are prepared to continue paying for the sins of others. Along with the regulation of the sale-and-rent-back sector, fraud was cited by the FSA as one of the main reasons behind the need to hike its fees. But surely raising the fines applied to those who step out of line is the answer to a funding shortfall rather than penalising those who obey the rules.
The Mortgage Market Review will ramp up the cost of regulating the market even more. So it’s vital that the FSA and government provide a full cost-benefit analysis before they pull the regulatory noose tighter around the neck of our fragile industry.