Q. What are your views on the Treasury’s new consultation paper on mortgage regulation?
My overall view is that it is a sensible extension to the regulatory environment that was originally proposed. It certainly clarifies people’s roles.
One of the problems CP98 had was that in many respects it was attempting to force the levels of control and regulation onto the intermediary, but with the responsibility landing on the lender.
What the new paper does is try to change that. From an intermediary’s perspective, that is both onerous and beneficial. It is onerous in terms of having responsibility to ensure they are qualified, authorised and abide by the rules. But under CP98, they would have had to abide by the rules anyway in addition to responding to the miscellaneous requirements of different lenders. So the new paper, in some respects, empowers intermediaries, which I think is a good thing.
Overall, the new proposals will provide benefit to the market as a whole. It should enable people to manage information sensibly and in a co-ordinated fashion. One interesting point in the paper is, however, point 35. This says independent mortgage advisers also have to be independent on other products. So advisers that are independent for mortgage products will find it difficult to remain tied to, for example, life products. This will undoubtedly pose a challenge for some people.
Q. How crucial will the role of trading platforms be to the implementation of the new regulations?
There are two core requirements that surround regulation. One is the process by which you do things ‘ can you abide by a process that meets the regulatory framework? And second, can you store and retrieve evidence appropriately? To do this is almost impossible in a paper environment.
Technology is needed to support and prompt you through the mortgage process ‘ to ensure you collect the appropriate data, to make reasonable judgements and so on to find the appropriate solution and to make sure you have evidence to show how you did it. You also need to transmit information easily and clearly. The Treasury is proposing a system where responsibility is shared between lenders and intermediaries. Information has got to be easily shared, which means you cannot just store it on your laptop ‘ you need to send it somewhere and share the information. Trading platforms will help enable this process ‘ the sharing of information, and the storage and recovery of that data.
Q. Will the extension of N3 and the move by the FSA to regulate advice affect the compliance solutions offered by trading platforms?
I cannot speak for other platforms, but we built a system we expected to implement by the original N3 date. It was built with the expectation that mortgage advice would be regulated at some stage and ‘ more importantly ‘ that the rules would keep on changing. So we have already built our solution even though we do not know exactly what the rules will be.
As people adapt and change the rules we need to tweak them within our rule engine, but they are there already. We are confident we can cope with any changes that come up, which is very important for the market.
Q. Do you think that there should be a single trading platform, or would multiple players be more beneficial to the market?
I can understand why some platforms may want a monopoly, but in reality, what is a trading platform about? It should be an underlying piece of infrastructure, so it needs to be independent and able to respond to market forces.
Our view is that if you have an independent market, your product is under constant competition and needs to be able to offer value for money. So if there is more than one platform, it is potentially beneficial to the market. Something that is controlled by a small number of lenders, such as Mortgage Brain, as the sole platform for the industry is unlikely to offer the best solution.
Q. What do you think advisers value most in a trading platform?
Advisers want something that reduces the cost of their operations, improves the service they offer their customers and helps them earn money. Unless you come back to these principles you are missing the point. Simply put, you need to have the ability to collect data in a structured, complete, integrated and compliant fashion.
Advisers want to enter information once and then use it many times. They also want to find an appropriate solution for clients, with a search and select facility. To stay compliant, you also need to demonstrate how you have done this.
Advisers want to be able to apply for products quickly and easily, with a fast response. They need a steady flow of information on the application, so they can manage the case effectively ‘ including information from solicitors, lenders and conveyancers ‘ so they can give customers the best possible service. I think we will see these solutions available within the next few months.
Q. Do you think a centralised data system all lenders can access would be a viable option in the future?
I believe lenders or product providers do not want to have to provide product information to lots of different places. Ideally, they want to enter information only once.
I do not see a centralised, market-owned system emerging, as it is about market forces. But if you can enter information in one place which can then send it to everywhere else for you, that makes sense. We have had some lenders say that they want to use us and us alone and that is fine. But I do not believe you should end up with only one system.
Q. How many lenders can advisers actively trade with via IFonline at the moment?
We have contracts with around 75 lenders who pay us for the services we give them. But that is different. In terms of how many lenders advisers can trade with, it is the whole market ‘ every one of them. We work to a principle that says we should provide access and the tools for intermediaries to be able to trade as easily as possible using a single process. Therefore they need to have access to the entire market and that is what we are attempting to provide them. We feel this is important in a trading platform.
Q. Which direction do you think trading platforms will take in the future?
The obvious one is that they will have to become more integrated with the compliance solutions. They will have to become more value-adding. This means they will have to be more than a system that transmits data from the intermediary to the lender, and start to transact information back the other way. Otherwise, intermediaries will become data entry clerks for lenders and they are not getting anything in return.
There are a variety ways that lenders can reward intermediaries, such as better case tracking. Trading platforms need to facilitate these things so that they are adding value to the process.
I think platforms will also supply access to a wider range of products. If you are filling in a mortgage application, that data can be used to pre-populate application forms for related protection products and general insurance. This is something we should see happening soon.
Q. Are there are any technological developments on the horizon that could streamline online trading processes further?
In reality, there is a lot of technology that surrounds existing systems that is not being used. What I see happening is a better take-up of existing technology, rather than massive investment into future developments. The reason for this is that lenders are under financial pressure at the moment. They want to invest in things that have proven to be productive and cost-effective. This means they will move towards greater integration. I think we will see more integration of administration and commission systems, so that information is more readily available and shared.
Kirstie Redford is senior staff writer