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AMI concerned by FSA mortgage advice findings

The Association of Mortgage Intermediaries says it’s concerned by the Financial Services Authority’s findings on the quality of intermediaries’ mortgage advice.

While the FSA gave larger networks and brokerages a thumbs up, describing them as having “robust” processes in place, smaller firms were found to have work to do to improve their advice and record keeping processes.

Rob Griffiths, associate director at AMI, says: AMI is keen to help ensure that consumers are provided with good quality advice on mortgages, delivered by advisers who are competent, professionally qualified, and adequately supervised.

“We are therefore concerned about the findings of the FSAs thematic work on the quality of mortgage advice.

It is clear that some mortgage intermediary firms have work to do to meet the standards required, particularly in the areas of adviser competence and supervision, record keeping, and monitoring procedures.

At the onset of statutory regulation, many mortgage intermediaries particularly smaller firms, did not have experience of compliance with a regime similar to that of the FSA, and have therefore had a steep learning curve to climb in meeting the requirements.

“Whilst mortgage intermediary firms are responsible for meeting the rules, the regulator also has a role to play in helping firms to understand how to fulfil their regulatory responsibilities, and in doing so, providing an effective regulatory regime for consumers.

Since its inception, AMI says it has worked to provide support to its members in meeting their regulatory obligations, both through the publication of its factsheets and good practice guides, communications at its roadshows and events, and through the provision of its technical advice helpline which deals with hundreds of queries from AMI members each year.

Griffith adds: For regulation to deliver effective protection for consumers, businesses must be able to implement the regime without disproportionate costs or disruption to the day-to-day business of the firm in serving its customers.

Nearly 30% of mortgage intermediary firms are sole traders and a further 10% are partnerships.

“Small firms, in particular sole traders and those with a small number of employees, will not generally have specialised, experienced, compliance staff and will therefore require greater help and support with the interpretation and application of the FSA rules.

“The Financial Services Practitioner Panels latest survey of regulated firms showed an increase in the number of smaller retail firms who were dissatisfied with their relationship with FSA.

“FSA has work to do in reviewing how it allocates resources and considering ways in which it can re-engage with smaller intermediary firms.

AMI is very supportive of the work that the FSA, in particular Stephen Bland and his team, has already carried out to help small firms in this respect.

“However, the results of this study demonstrate that further work is needed. This need will intensify with the move to a more principles-based regulatory regime.

Many larger mortgage intermediary firms feel that FSA resources are not evenly balanced between small and large intermediary firms: they are concerned that many smaller firms are below the FSAs eye-level and therefore beyond the reaches of regulatory scrutiny on a day to day basis.

“Whilst this could simply be a matter of communication between the FSA and the mortgage intermediary community, the results of this study could indicate the need for the FSAs to increase its visibility amongst small firms and send out a clear message to the industry that no firm is below its radar.

AMI would be pleased to work with the FSA to help the regulator provide mortgage intermediary firms with practical ideas on ways to meet their regulatory requirements.

Later this week AMI will publish a factsheet on implementing a Training & Competence scheme in a mortgage intermediary firm.

The objective of this factsheet is to provide straightforward steps for mortgage intermediaries to design, implement and monitor a T&C scheme for their mortgage advisers. Members are advised to use this factsheet to review current T&C arrangements.

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