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Calculate the benefits of insurance

I’m one of the loudest critics of the size of the Financial Services Authority’s annual budget and its lack of concern for the cost of regulation, so I was delighted to see its recent announcement on annual fees.

In nearly all fee blocks, increases in the regulator’s minimum fee have been capped at 3%. This will benefit about half of all regulated firms.

Understanding future business costs and planning for them is an important factor for all businesses. Fortunately the FSA now recognises this and has added a useful fee calculator to its website. The earlier firms use this calculator, the quicker they will be able to plan for forthcoming regulatory fees.

The calculator also gives firms the opportunity to run different scenarios with different permissions. This could be useful for firms planning to satisfy more client needs than they do at present.

I’m often surprised by the number of firms that have permissions to sell mortgages but not general insurance. Surely they go hand in hand.

Apart from the fact that clients are more likely to return for future advice if they have bought more than one product initially, there are other good reasons for offering advice on more than just mortgages.

First, although many lenders have increased proc fees lately, especially in categories such as self-cert and buy-to-let, the time it takes to give mortgage advice from the initial interview to completion is increasing.

Unless brokers are based in areas with high house prices, basic proc fees might not amount to much when the costs and time involved are allocated and an hourly rate extrapolated. Advising on other products such as general insurance or conveyancing will increase income levels per customer and the resultant hourly rate.

Second, the pension plans of many brokers are based on selling their businesses or receiving renewal commission in retirement. Selling general insurance is a good way to secure future income.

I know there was a recent hiccup with Paymentshield scrapping the payment of renewal commission to its retired brokers, but there’s nothing in the FSA rules that make this mandatory. It’s simply a case of choosing the right provider.

I’m an advocate of using the FSA’s free tools and its fee calculator is useful for more than working out your next bill.

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