Lenders were urged to communicate with their intermediaries regarding forthcoming regulation to secure crucial distribution at the recent Building Societies Association conference in Harrogate.
Susan De Mont, manager of mortgage policy at the Financial Services Authority (FSA), told delegates: ‘Talk to your introducers and find out what their problems are. Should they join a network or remain independent? The more you understand about the problems they face the better you will be able to secure that distribution in the future.’
She said the FSA did not expect a significant number of market exits: ‘There will be some that will not meet the standards but I cannot say what the cumulative impact will be. The industry is innovative about responding to external changes and I feel sure it will find a way around it.’
Luke March,chief executive of the Mortgage Code Compliance Board (MCCB), disagreed, warning that regulation by the FSA would ‘drive advisers underground’. He suggested a large number of firms would opt to become unauthorised introducers. ‘My take is that the number of firms will reduce. I hope that they do not go underground. If 8,000 [advisers] disappear that will not be good for borrowers. Many of the smaller lenders will struggle if the intermediaries are not there.’
He added: ‘They will get a fee for that and do just as well. They have so many choices now. Networks are providing good deals and that puts significant pressure on building societies and lenders. Some will seek authorisation but whether they will be there one year on, I doubt it. They will go to networks or leave. It will affect smaller lenders but bigger lenders will do very well from it.’
March expressed fears over the status of complaints after the transition to regulation under the FSA.’I am concerned about what happens to complaints about business done today. It is a concern for intermediaries and borrowers will not be protected.’
De Mont acknowledged the difficulties firms faced in obtaining professional indemnity insurance and that it was likely to get even worse. March said the MCCB had already carried out 2,000 visits with the result that 300 firms had been deregistered already for not having professional indemnity insurance.
Although less than half of enquiries to the MCCB lead to an application, by 30 April, 57,000 advisers had qualified according to March: ‘Something good must have come out of this because hopefully those people are not around now. A lot of people got cold feet.’