The biggest story last week aside from the unexpected and largely unwelcome rise in interest rates was the publishing of the Financial Services Authority’s review of the mortgage advice sector.
The regulator carried out a review of 252 firms of differing sizes through a combination of mystery shopping, visits and questionnaires, with the majority of its criticism being reserved for smaller mortgage networks and advisers.
I am glad to see the FSA finally realising that the loophole created by direct authorisation needs addressing. Direct authorisation has always been an option and many advisers have taken this route, no doubt spurred on by the encouragement of those already directly authorised who saw it as a soft option.
The report confirms that large firms and banks are generally operating robust systems and controls, which encouraged the regulator. But it was damning when it came to looking at smaller firms.
Anecdotally, I know that many advisers who have become directly authorised did so because they want an easier life and were fed up with what they saw as the overly burdensome compliance imposed on them by larger firms. But this report shows that there is nowhere to hide.
Among the criticisms of smaller advisers and networks was the observation that some firms were not only allowing unqualified advisers to give advice but were providing poor evidence of product research.
They also failed to provide clients with appropriate and accurate documentation, which is not surprising given the discovery of an overarching lack of management controls.
Almost 40% of advisers are either sole traders or partnerships. This represent a significant risk if the FSA research is extended to the entire small firms sector. Let’s hope it keeps the pressure up and weeds out those people not prepared to do the job properly by finally preventing them from having somewhere to hide.
Comments that have no place in a modern society – building or otherwise
Paul Beardsmore, the general manager and secretary of Market Harborough, stuck his foot firmly in his mouth last week with his homophobic and evangelical views.
In short Beardsmore claimed that homosexual and transgender groups discriminated against Christianity and that as a consequence there was serious trouble ahead.
Ironically, the society was being congratulated for its progress towards equality by gay rights group Stonewall when Beardsmore decided to make his views known, proving the old adage that stupidity knows no bounds – only this time he chose a financial news website to do so.
Unsurprisingly, the society moved swiftly to distance itself from Beardsmore’s comments, stating that the views expressed were personal and not those of the society but I’m not sure that will be enough. As a main board member, Beardsmore has significant influence in the society which means it is in danger of being tarred with the negativity associated with his opinions.
These types of comments have no place in today’s society and have been widely condemned by many in the industry. Beardsmore needs reminding that you might think it but you don’t say it. And you certainly don’t publish it – especially when you are occupying a position of influence and governance. That said, it did tickle me to learn that one of his main areas of responsibility is compliance.
Advisers one, economists nil
Last week saw the surprise decision by the Bank of England’s Monetary Policy Committee to increase interest rates by 25 basis points to 5.25%.
The MPC cited concern over inflation as a key driver for putting up rates but it caught the City and most of the mortgage industry by surprise. In a poll of City economists undertaken at the end of last year, 49 out of 50 said they thought we were in for a period of stability in interest rates.
Like actuaries, these people study for years to learn how to guess accurately but when they are called upon, they can’t do it properly.
And just when we thought the financial industry was getting dumbed down to a level where the next thing to go will be advisers, AXA published research showing that clients who take financial advice from professional advisers are able to significantly reduce household debt and boost their savings.
No really, it did.