Far from the almost apocalyptic impact that had been feared, the main issue was teething troubles which stem-med from Key Facts Illustration generation.
In the early stages of regulation there was also a slowdown in innovation as lenders and brokers got to grips with the ramifications of the new regime. There was overcomplication in an effort to be bulletproof from a compliance perspective.
The market gradually got used to the new requirements and the volume of business has continued to increase, leading to record lending figures. The FSA assumed an initial role of education and has taken a positive stance as a watchdog.
But the further into the regulatory regime we get, the more information is available and gathered. The monitoring process is obviously the key to statutory regulation – what would be the point if it were not policed?
An FSA review recently found “significant failings in the advice giving processes in a number of mortgage firms” so there is plenty of work to be done before the industry can pat itself on the back.
Of course, there will always be room for improvement but this review shows that some firms need a major rethink in their approach to regulation.
Interestingly but perhaps not surprisingly, a clear distinction was made between different sectors of the market. Large networks and brokers fared considerably better than small firms.
Most large firms were deemed to have robust processes in place whereas more than three-quarters of small networks and advisers did not.
It’s good to see that large firms have embraced regulation and taken it seriously, but questions must be raised about why small firms have struggled.
It seems clear that resources are at the centre of this issue and it stands to reason that a firm of only one or two is unable to dedicate the time and manpower of a big firm.
Perhaps record-keeping and the development of robust processes falls by the wayside in coping with client demand – ironically the same clients regulation was introduced to protect.
The role of a body such as the Association of Mortgage Intermediaries will be crucial in addressing these issues and helping small brokers develop stronger processes.
Regulation can only improve the image of the industry so it is essential that there is help available to assist advisers improve. If firms fail to improve, the FSA will and should look to remove those who do not make the grade.