JOB OF THE WEEK

Back in October 2008 in an interview with the Financial Times, FSA Chairman Lord Turner, implied that intermediaries had been paying too much in regulatory fees, especially in relation to the levels of risk they posed to the economy when compared to larger institutions.   

This issue once again came to the fore in February when FSA published their proposed regulatory fees and levies for 2009/10, proposals which saw intermediaries fees increase dramatically without justification.

As members know, AMI launched a highly publicised ‘fees campaign’ in response, urging those in the profession to unite with one voice and respond to the FSA’s proposals.

We assembled and coordinated a fees strategy group to ensure members were fully informed of all the issues, to develop strong workable solutions and to mobilise grass-roots support. We also sent correspondence to hundreds of firms asking them to respond to the FSA’s fees consultation paper.  Not only did the profession respond but you responded in force – an impressive 533 responses to be exact.

On the political side of things we engaged in a highly constructive dialogue with HM Treasury, as well as meeting with civil servants and politicians from across the spectrum to outline our concerns. Additionally AMI’s Chairman, the Rt Hon John Gummer MP personally intervened on the matter due to his strength of feeling that fees needed to be reduced.

We also met with senior FSA staff to voice the distress of the profession, and embarked on a significant media programme to highlight the issues raised.

We were therefore delighted that FSA took note of our campaign and lobbying and this week reduced the level of fees payable by IFAs and mortgage advisers by £11.7million compared to the initial February proposals.

Mortgage brokers will only see a 2.7% hike, compared to the original proposed increase of 21.2%.  The increase in fees for IFA’s, which were slated to rise by 15%, will now increase by just 4.8%. And for firms with general insurance exposure, fees will increase by 9% compared to the proposed 19.8% increase. The FSA says once the financial penalty rebate is applied, approximately 10,000 of the smallest firms will see a fee reduction compared to the previous year.

This is an appropriate and welcome measure in difficult economic times.  AMI strongly believes that regulatory resources, and therefore costs, should be focused on those firms that require increased supervision and not those in the mortgage advice profession.

This announcement also shows the power of constructive lobbying and it is testament to the whole profession that uniting with one single voice on such a key issue has resulted in such a positive outcome, providing significant savings for firms.

Finally I want to echo John Gummer’s sentiments in thanking FSA for their bravery in changing their minds on such a key issue.

As the dust settles from the FSA mortgage conference, and the sound-bytes and rhetoric end up in office bins, the hard work starts.

June will see AMI commence its detailed dialogue with the FSA on what is being proposed. We are issuing a member survey to find out what the important issues are in members minds.  I encourage all who have an interest in the future of our industry to contribute.

If our experience of the past is anything to judge by, this will be a long road with many twists, turns, frustrations and set-backs.  We will not reach the end of the debate and get the final new rules of the game for well over a year.  

So AMI will listen, will plan, will discuss, will agree our priorities.  AMI will be at the heart of the debate with the FSA.  Members need to engage, and tell us what is important to them. We will argue the broker case robustly.  We will fight for a fair market. We will champion that we are the customers’ natural choice and work in the customer’s best interests.

Lenders will also have their say and we will work with them where we can but there will be issues where we differ.  That is why we have an FSA who will ensure a solution that works in the best interests of customers and the wider market.

I am asking all our members to engage, and tell us what they think are our key issues.  For example, we may have to fight to retain procuration fees and if that is our most important issue, I need to know that.  Working groups will be established and we will agree policy positions though the Board.  Members must frame this future and we are committed to making sure all voices are heard.  Crucial to this is participation.

Chris Cummings and I are committed to protecting the interests of our members.  What we need is full engagement through all classes of members to make sure we are very clear what those interests are.  By being clear, united and speaking with a single voice on the issues that are critical, we will win the day.

I am en route to speak at today's FSA conference on the mortgage market. The day started early with interviews on Radio 5's wake up to money slot and then on the Today programme on Radio 4. While it's true that the mortgage market makes headlines these days, it's not always for the right reasons!

The FSA will announce their thoughts for wholesale reform of the mortgage market. I am told their ideas will be very "green" (in the sense of open to consultation as opposed to environmentally friendly - though a reform of disclosure to cut down on paper would help on both counts!). The regulator has an opportunity to do some good in the industry and actually help would-be borrowers and those looking to remortgage. However, there is also  the danger that innovation will be curbed, costs added and consumers actually made worse off. There are some "knife edge" decisions to be made.

There has been much discussion of "product regulation". Well, we've tried CAT standards (and the Sandler suite) and it failed miserably. So it's not retail product regulation that's the answer but institutional and funding regulation that needs to be addressed. Too many lending institutions flooding the market with poorly risk-assessed and untenable products helps no-one and builds a propensity to bubble-like conditions.

FSA need to review their authorisation process. Time and time again we see the regulator assessing firms which are behaving poorly... but they are the ones who granted the people running the firm the remit to do so - and were supposed to check the business plan for robustness and also make sure that's what the firm actually did! The whole process needs root and branch reform.

The financial promotions and disclosure regimes are simply out-dated. If this were not the case high street institutions would not be able to run adverts claiming to offer "impartial" advice that actually offered little more than slick-sales. Where is the regulator's enforcement team one wonders?

We have seen a huge focus on mortgage fraud - and rightly as it is a cancer that eats at the reputation of the sector. Yet the only action taken is against bad intermediaries who should not have been granted authorisation in the first place. But can an intermediary commit "fraud"
in isolation? Surely if it is a "successful" fraud monies must have been released from lending institutions... Were they complicit or duped? And if duped how was it possible for such small firms to beat the systems and controls of far larger institutions? I am waiting for the other shoe to drop and the suspense has been building for a long time; one wonders what is causing such a delay and where the police interest is in such matters?

This is a time for joined up thinking between the Treasury, Bank of England and FSA. We need to see lenders being "encouraged" to lend rather than having mixed messages delivered to them about capital protection, rebuilding balance sheets and offering some limited lending. The state controlled lenders should have a segregated funding commitment to lend to first time buyers as a way of kick-starting the market.

We have recently published two reports that explore these ideas more and they can be accessed through our website. The first is a report on the Fiscal Stimulus needed for the market, the second looks at the future of retail regulation. Members' views are sought on both topics so that we can lobby for your, and your clients', best long term interests.

Today is the day to express your views. The mortgage market, and wider housing policy, will affect your business, speak up and speak loudly!