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Value of regulation is not yet known

Intermediaries have been busy this year and long may it continue. But don’t the years disappear quicker as you get older? As we hurtle toward the first anniversary of statutory regulation I try to think where the year has gone.

Some memories of the aftermath have been discarded long ago. Not wishing to bring them back too vividly, there were system errors, printing problems and general mayhem. We all lived to tell the tale but for some the experience was desperately frustrating.

The run-up to regulation was a phoney war. Many lenders presented a negative view of polarisation. Some used scare tactics to push brokers in one direction or the other. More enlightened lenders presented both sides of the equation. The facts were presented, leaving the intermediary little doubt over the direction that was likely to be best for them.

Studies showed the bulk of the industry would go down the appointed representative route. The reality was different. Most opted for direct authorisation, leaving some networks short of AR targets.

Then another disaster scenario was advanced. Large numbers of brokers would flee the industry and find a non- regulated sector or just close down. Another prediction hopelessly wide of the mark.

So, as the first anniversary approaches where are we? There is pretty much universal agreement that the Key Facts Illustration is just too long. The Financial Services Authority should work with trade bodies to cut it back.

The KFI is one of the cornerstones of the disclosure regime. The document is intended to give the customer the chance to make more informed product choices. A hoped for spin-off was that the financial literacy of customers would be improved with some understanding of the product they were buying. This latter will, I feel, have to be a longer term goal.

On the whole, the industry has taken regulation pretty much in its stride. The nightmares did not come to pass.

But the issue of cost remains unresolved. Lenders and brokers have borne the bulk of the costs of regulation so far but ultimately the bill will be picked up by the borrower.

Looking forward to this time next year when the industry reflects on two years of regulation, will customers be getting the value for money regulation they deserve? Call me a cynic but in my experience the costs of exercises such as this tend to rise rather than fall.

So, on the central issue of the cost benefit breakdown of regulation we just won’t know until the final bill is in. Simon biddle


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