There are a number of ways software will be affected by the Treasury’s decision. First, once it is clear what will be required, sourcing software will need to be amended to address the Financial Service Authority’s (FSA) requirements in terms of the sales process and the presentation of information.
Changes will be required to ensure any FSA requirements for both the collection of information and provision of information to the customer are addressed. There are some pointers to the likely form that some of this will take in CP98. We do not yet know what the FSA’s requirements will be and need to wait for their next consultation paper.
There is an opportunity for software suppliers to assist intermediaries in developing and adhering to the new regulatory requirements by ensuring that compliance is built in as a part of the sourcing process. Seeing as advisers will be regulated, they will need help to ensure compliance with the new regime. At the moment this would place considerable burdens on them, as they do not have the expertise to define and implement the no-doubt strict compliance requirements to be expected from the FSA, especially when compared to the existing Mortgage Code.
The recent Treasury paper indicates advisers and arrangers will be regulated. We have yet to see exactly what this will cover, but it is expected to go beyond the existing Mortgage Code Compliance Board (MCCB)- registered advisers, to cover those who only operate as introducers.
A final challenge for software suppliers will be how the FSA determines and assesses the quality of advice provided. This will have an impact on sourcing as it may be necessary to demonstrate that the right information has been collected and that this information has been used appropriately to determine a recommendation. We do not know the parameters that will be set down by the FSA ‘ if they set any at all.
One thing is for sure, Q2 2004 is not far away in terms of software design and implementation, and we will not know the shape of the challenge until the FSA consultation paper at the earliest.