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DA firms not in FSA crosshairs, says Malone

Procuration fees have again grabbed the headlines, with issues being raised that have been bubbling under the surface for the past year. 

But this isn’t just a parochial debate; it is one that could have a major influence on the future shape of the intermediary community.

That applies equally to the future of large mortgage firms, along with the preservation of smaller firms who have for many years provided quality advice and customer choice.

What we are desperate to avoid is any prospect of the small intermediary being priced out of the market. 

There have been suggestions from some commentators that on the back of the Mortgage Market Review and the Mortgage Thematic Review, the only people who will survive are the large firms, with smaller directly authorised firms being shoehorned into a network or forced out of the market altogether.

I, for one, do not believe that is the regulator’s intention. I have not seen or read anything to suggest that this new element of regulation is designed to eliminate the small intermediary. After all, if we wipe out thousands of intermediaries then who will look after their existing business and clients?

It is clearly important for the lending community to have a better understanding of the firms they are engaging with. But it is in all our interests – regulators, lenders, distributors and intermediaries alike – to have a healthy and stable market.

Each lender will interpret the FSA’s requirements differently, but it’s up to us as a major distributor to help them in formalising better relationships with those intermediaries, the vast majority of whom have excellent relationships with their clients and do a first class job in the advice process.

We are working closely with lenders to understand what they are looking for and how we can help. We are also using our compliance expertise to develop regulatory solutions for intermediaries to help them meet lenders’ requirements.  

Last year there was a 10% reduction in mortgage advice firms. This is bad news for consumers, who need more access to professional financial advice, not less. Our group recognised this issue some time ago, which is why we launched The Financial Adviser School to help develop and nurture the next generation of professional advisers.

At some point the funding situation will improve. When this happens, mortgage intermediaries will be pivotal in helping lenders and consumers to build a sustainable and successful future market.

That is why all parties have a responsibility to take sensible long-term decisions.

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  • Bobby 20th April 2012 at 10:35 am

    John my old mate. Where have you been for the last 4 years , on the Moon ? The FSA have not come out and stated ” we want every single mortgage intermediary wiped off the face of the earth ” but eveything they have done has been to make this happen. Very clever really. They just want a mortgage market of half a dozen monopoly type Banks and half a dozen networks if there really must be any intermediaries in the marketplace. The MMR and the ” know your contact ” was done with the sole intention of making this happen and the lenders have seized on it. There is no future for a DA intermediary now, they will have to be shoehorned into one of half a dozen networks as there will consolidation here as well in the next few years. The real pity is the AMI and other bodies including brokers themselves have just rolled over and let it happen without putting up a fight. The FSA must be laughing in Canary Wharf with their Banking chums over a spot of lunch at how easy it is has all been. Oh, and please stop the patronising ” one day ” things will get better “, we have heard that since 2008 and it’s getting a bit boring now. How long do you think a broker should be prepared to wait or indeed be able to wait ?

  • Peter 20th April 2012 at 7:07 am

    I think this is happening all ready. Certain large providers are only making their products available through the big networks and this is the thin end of the wedge.

    MMR should have been brought in when orrigionally planned then the credibly of Brokers could be upheld because at the moment who knows what’s going on

    It would appear that only the big networks are applying the FSA F&P rules as I recently found out when switching from DA to network.

    In light of the pending changes Its the best move I made.

  • Peter 20th April 2012 at 7:07 am

    I think this is happening all ready. Certain large providers are only making their products available through the big networks and this is the thin end of the wedge.

    MMR should have been brought in when orrigionally planned then the credibly of Brokers could be upheld because at the moment who knows what’s going on

    It would appear that only the big networks are applying the FSA F&P rules as I recently found out when switching from DA to network.

    In light of the pending changes Its the best move I made.

  • KS 19th April 2012 at 3:31 pm

    I think you will find that the FSA will advise the banks how they should receive business going forward. The FSA dont forget are all ex-bankers and will never change the way they think/regulate or treat brokers fairly. This way the FSA are not seen upfront doing the dirty.

    Dont forget the majority of the FSA fees are paid for by the big banks so the more money they make the more money the FSA receive. If they rip their customers off, they get a slapped wrist and a fine, so what they can afford it.

    I dont see any of the banks having their licences removed due to continual mis selling, but if it was you or i, then we would be struck off within days

  • Jonathan Burridge 19th April 2012 at 3:13 pm

    Do I confess to having to look up “parochial”? Anyway, I have to disagree with The Godfather. I am a sole trader, its suits me, but from time to time I eye up jobs in larger firms because they offer some more security in these uncertain times. I am just either too lazy, stubborn or dumb to move (perhaps all three). That aside, I believe that we will continue to see consolidation in the advisor sector, maybe the 10% reduction last year (stated by John) is normal, but we are not seeing new advisors joining therefore our numbers are contracting, perhaps because, quite frankly there are more secure, stable and profitable career options today that are attracting would-be recruits?

    The question remains what is the value of the intermediary today? It would appear less valuable which is why there are rumours of commission reductions. The latest idea mooted being that commission will be linked to “quality”. How can a lender assess quality of the intermediary until they have seen sufficient business to be able to measure it? Therefore, business volumes would seem to be a crucial requirement in the assessment of quality. Therefore, if you are a small business you are not going to be fairly assessed by an individual lender until you have submitted enough business. Therefore, the larger companies will benefit from the higher commission rates, pushing sole traders or smaller businesses into larger firms, or, out of the industry.

    With regards our Regulators and providers stance; they have not outright stated they want an end to smaller businesses, however, the burden of compliance bears far heavier on smaller businesses to the point that I cannot see how it is economical for a one to three man band to be directly authorised. I recollect some-one within the FSA saying that the worst compliance to regulation was found in the smaller firms, as was the highest likelihood of fraud. As the “F” word seems to fall trippingly off the tongue of Regulator and lender alike these days, with almost daily press releases of another wayward individual advisor being convicted of fraud, it seems logical that there would be some focus on such firms. I am sure such attention would not be outwardly expressed or even acknowledged.

    Of course, all of this is only my supposition and what do I know? I will gladly be proved wrong. Would be interesting to hear some lenders actually say what they are thinking and why.

  • steve mcgill 19th April 2012 at 3:13 pm

    i have no illusion that the Banks will not get their way with MMR – and that they will continue to plough their own furrow. The proviso that advice must be given is the only decent bit of the whole review for the small broker – but the Lenders will undoubtedly have that overturned in their favour – after all – money counts and all the FSA staff are looking for lucrative positions.
    Pardon me for being cynical

  • Dave 19th April 2012 at 2:56 pm

    You ‘have not seen or read anything to suggest that this new element of regulation is designed to eliminate the small intermediary’???

    Where have you been John? Everything the FSA has ever said or done has pointed to this! They deny it but have always ruled in favour of the big boys – the MMR is the first time the FSA has actually done something that has seriously upset the lending community, namely, that they will have to give advice in future when facing clients.

    So confident were the lenders that this change would not be made that they didn’t bother to argue their case with any vigour until after the publication of the final document. We’ve seen them whingeing since but it’s too late.

    It’s a small victory – we need many more yet, before smaller intermediary firms will feel the regulator vaules their presence.

  • terry@aol.com 19th April 2012 at 2:52 pm

    Sorry John I do not agree with you. Mortgage Brokers will be treat the same by the FSA as small Independant Financial Advisers have been over the years. Exams taken by brokers will be ignored, fees will shoot up and the small broker will disappear.