Apr 16 – Milestones or Millstones

Mortgage advice is a crucial part of the financial landscape for many.  Ensuring it is effective must be a core part of the work of the FCA.  However the costs that it thinks the industry must shoulder is worrying.

In 2009 when the bill for regulating intermediaries ticked over £10m most saw this more than doubling in costs since FSA acquired responsibility from the MCCB in 2004 as a milestone.  This was nothing compared to the 32% hike in 2010 to fund the work to be undertaken in the Mortgage Market Review.  Despite the pain, the industry swallowed hard, paid the fees and worked with the regulator to implement the agreed plans and build better, more compliant firms with significant compliance and risk support that did not exist pre-crisis.  Verbally it was inferred that some of these costs were one-off and project based and would recede once MMR was implemented.

Inflationary increases prevailed until 2015, when we received another explosion in costs ascribed to the Mortgage Credit Directive and a need to build a new shiny competition vehicle within the FCA.  The Competition and Markets Authority and their approach is not enough – Financial Services needs its own special breed of competition economists and lawyers to pick over what remains of the advice industry following all improvements ushered in by RDR and MMR.

The last two rounds of FCA fees reviews introduced a further 16% increase in fees on mortgage advisers, for what is the same industry we have always had.  A fee block charged £10.9m in 2009, then £15.7m in 2015 will be charged £18.2m in 2016.  In this time direct supervision of mortgage advice firms has evaporated so we have no direct access to advice and help.  In addition firms are carrying the yoke of a regulator that has significantly failed to police effectively, meaning the costs being levied through the FSCS continue to escalate.  It cannot be right that the FCA is allowed to add cost to firms without any accountability for its own failings.

Firms have the millstone of risk and costs around their neck with a regulator that thinks they have an open cheque book.