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The charge of the fee brigade

Whether you are an investment adviser, mortgage intermediary or insurance broker, our regulators are likely to be increasing your costs.

Adding new rules and disclosure, they are also generally wanting to get up close and personal by interfering more directly in how we run our firms. 

This obsession with micro-managing the process indicates to me a lack of faith in their own ability to determine strong central controls over and effective supervision of product providers.

So to deliver more control we are seeing another inflation busting increase in FSA fees. 

The £500m budget proposal is of course dwarfed in our sector by the additional £300m bill being levied on investment firms by the Compensation Scheme for the failure of firms such as Keydata. 

That these represent significant failures by the FSA to identify and deal with high risk firms under their nose is the biggest concern.   We pay for them to be involved and we pay for their failures. Being the FSA looks too much like a one-way bet.   

The combined cost of looking after mortgages, lenders and advisors, escalates to £28m for the next year. Many of us “old timers” remember fondly the MCCB.  70 people who cost us £4m to regulate 150 lenders and 40,000 sellers in 2004. So where do we think £28m goes.

Taking the average cost of an FSA employee, £57k and discount this as mortgage people cannot be as expensive as Capital Markets staff, let’s round to £50k.  If I placed teams of 10 full-time supervisors in all the 25 most active lenders then that comes to £12.5m. 

So with the rest I can do policy, ask questions and run some MI (?)……and have some change left over…..

Another way of looking at this is that the mortgage sector accounts for 5.8% of the total FSA budget and by the end of the year the FSA will have 3700 staff.  So what are our 200+ mortgage staff doing?

In addition we have to pay for FOS and FSCS and this looks like relatively good value for money. 

The additional increases for consumer education and money advice by 33% is a cost we cannot afford at this point in the economic cycle.

Although a desirable and encouraging commitment to improving consumer awareness, intermediaries cannot take the hit for this. Given the average mortgage broker is struggling to make £30k this year, it is difficult to understand the justification or sense of these fees.  

At AMI we are reminding the FSA that regulation must be proportionate and affordable. 

These fees and costs are becoming a barrier to trade.  Intermediaries are a force for good, give consumers genuine advice and choice and keep lenders competitive and honest. 

In summary, as the direct and indirect costs of regulation escalate, more and more of the brightest and most flexible in our industry look at this and think there may be better ways of making a living with less personal risk. 

The regulator risks damaging one of the greatest forces for good without realising it. 

My plea to the industry is to stay involved with the one trade body which has the voice to make a difference.  At AMI we will continue to campaign for our members to stem what feels like a tsunami of costs and regulation.

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  • Nic 3rd March 2011 at 10:32 pm

    I thought AMI was the FSA (a wolf) in sheeps clothing?

  • mic2002 11th February 2011 at 5:45 pm

    I guess nobody has actually thought of exercising your democratic right to protest and defy these bullies?Since we pay them to regulate,they need our money to survive.If we all agreed to postpone payments what could they do?Ban us all.But I think not,we all too scared to stand up to them.A pity.

  • Ian 11th February 2011 at 4:40 pm

    3700 working for the FSA, what do they all do? Are they all on 50K?

  • Lisa Williams 11th February 2011 at 4:38 pm

    “This obsession with micro-managing the process indicates to me a lack of faith in their own ability to determine strong central controls over and effective supervision of product providers.”

    < How incredibly accurate. "These fees and costs are becoming a barrier to trade. Intermediaries are a force for good, give consumers genuine advice and choice and keep lenders competitive and honest. In summary, as the direct and indirect costs of regulation escalate, more and more of the brightest and most flexible in our industry look at this and think there may be better ways of making a living with less personal risk. The regulator risks damaging one of the greatest forces for good without realising it." > I am starting to think that that is the whole point; the lenders don’t particulrly want us and the regulators clearly don’t, not so sure about the customer either at times so perhaps that is the ultimate aim!

  • david 11th February 2011 at 4:28 pm

    At last AMI is on our side. In the past I always viewed them as being the FSA’s poodle. I might reconsider joining again. Well said your views are exactly what most of us think.

  • C J 11th February 2011 at 4:19 pm

    It is the FSA that has convinced me and many other honest mortgage advisers to leave the industry for good. For old timesake we still read the trade press because we never wanted to leave the industry we loved but were forced out of it by continuing burdensome regulation and an economy destroyed under the FSA’s watch. The FSA have their noses firmly in the trough, they will continue to consume every last bit of our industry until the trough is empty and most of us have all been starved out of existence. good luck to all those still trading, your next on the FSA’s hit list!

  • Dave 10th February 2011 at 2:29 pm

    Excellent and right to the point Robert, as usual.

    The FSA has been paranoid about not taking any blame for its actions – by the use of principle-based regulations, which have been shown to have been utterly useless and has led the regulator to now interfere after the horse has bolted.

    In reality, they have been an expensive and useless nuisance and have failed in every significant aspect. The costs they have imposed on the industry are out of all proportion – especially mortgages as your article illustrates.

    The regulations they are imposing upon the remaining brokers is stifling customer choice because good advisers are leaving the industry in droves.

    If the FSA had pursued the simple course of identifying the rogue firms (and everyone in each town knows who they are) and taking steps to make them change their ways or be closed down, the remainder of the small broker firms that do a superb job for their clients, could get on with what they do best.

    In over 6 years, the FSA has closed down about 100 firms – wow! If they had acted sooner and taken out all the bad apples, we might not need to suffer all the ill thought out proposals in the MMR.

    Keep fighting the fight Robert. Our industry needs you.