Peter Beaumont: Now we have the final rules what opportunities do you see for your company in the post-regulatory market?
I think there is still a great future in packaging and distribution, and consequently AToM may not set up a network or look at the appointed representative (AR) market in any great depth. I am concerned about the risk/cost benefits and, even at this stage, I do not know exactly where the market is going to settle down. But those who obtain direct authorisation and those who become introducers will still need to place their business somewhere. And the networks will still need to have packaging companies on board, so there is room to offer services to them too. Business will still need to be managed and lenders will still want diverse distribution channels. We see our future in these three distinct areas.
Ben Marquand: What do you see the split being between appointed representatives and those who will become directly authorised?
I think 70% will be directly authorised, of which 10% will be introducers, and the remaining 30% will be appointed representatives.
Peter Beaumont: What plans have you made to date and when will you be announcing your strategy?
We deliberately have not announced our strategy yet. I think AToM will go to the market in February or March next year, but the likelihood is that we will not take on ARs. We are not searching for them, and we are not budgeting for them.
This does not exclude us from considering a small number of AR partnerships and we probably already know who they are likely to be if they fail to achieve direct authorisation status. We will provide a high-quality packaging service to those who choose direct authorisation, and provide a fully compliant service to those introducers who choose not to become qualified to arrange mortgages. Through an associated company in the AToM group, we can do this and conduct business in the direct market to our existing customer base at the same time.
However, we will apply for principal status for the whole group initially. This will enable us to move, if the market dictates, to provide a network facility although I am not certain we want to be there. I am concerned that no one fully understands yet the implications in terms of compliance, training and competence, and professional indemnity insurance. There are going to be some spectacular financial catastrophes over the next two to three years which may well be caused by lack of day one understanding of the cost cycle some prospective companies are buying into.
Peter Beaumont: What consideration have you given to setting up your business-to-consumer-arm as a separate legal entity?
We have several different strands and one of those is a direct-to-consumer-arm which will be totally compliant under statutory regulation. I believe there is an argument to say it is in our interests to regulate the whole business at the same time, so we will apply to do so from day one. What we have established is that the FSA appears to be happy about owners working across more than one business within a group, both regulated and non-regulated, provided the non-regulated business is not arranging or administering mortgages. The MCCB was unhappy about this, but the FSA is happy as long as a clear demarcation between the businesses can be adequately demonstrated.
Peter Beaumont: What additional services will you be offering to advisers post-regulation?
We are going to offer just two products, mortgages and lifetime mortgages. Unless we are forced backwards into offering a network we will stick to these two areas. We don’t want to go into other areas. There are other companies out there who are highly qualified to handle this. However, this will be a different story for our direct clients and we will need them to put that business with someone else. We are talking to Premier Connections and Legal & General at the moment.
Ben Marquand: What will be the costs of regulation to your business?
We have already invested in a totally new mortgage packaging and processing system which will enable advisers to track progress in real time. They will be able to interact with us this way with a facility to leave notes on the system which must be actioned before staff can move on to the next case. This system cost over £1m to develop and will be available in the new year. But because we are not looking to create a network to a degree we are not committed to the potential heavy costs that many of our competitors are to undertake.
Peter Beaumont: What are your views on multiple principal agreements, and will they work in practice?
I am not sure about multiple principal arrangements. We have hired a consultant to examine the positives and the negatives and we will make a decision before the end of the year. My view is that we will do mortgages and lifetime mortgages and outsource everything else. The question is, where does the brokers loyalty rest and who is going to assume responsibility as the lead principal or does the broker and the principal have to share full transparency and responsibility? I think there will be problems of cost and control. It is most likely that only those with a large financial backing will be able to successfully manage this.