According to the regulated fees and levies CP21/8 paper published today, brokers earning more than £100,000 in annual income will see their FCA fee rise to £11.031 per thousand pounds of income.
Overall, the FCA expects to raise £18.4m for its annual funding requirement from those in the A.18 home finance providers, advisers and arrangers block – a 1.3 per cent increase on last year.
Broker fees for the money advice levy will also increase from 13.9p per thousand pounds of income to 17.6p. The same level will apply for the debt advice levy.
There is some better news with the FCA confirming its minimum flat fee for firms in all A-blocks will be maintained at £1,151 for the year.
But an increase in application fees for newly-regulated firms and in consumer credit fees will apply.
£26.6m increase
In all, the FCA is proposing a £26.6m increase to its annual funding taking it to £616.5m – up 4.5 per cent from the 2020/21 financial year.
TheFCA confirmed the Financial Ombudsman Service (FOS) is increasing its general levy by £12m to £96m for the year, which is also collected by the FCA, and the FOS has increased its case fee by £100 to £750.
“Keeping minimum fees unchanged for 2021/22 will continue to help protect the smallest firms from the impact of Covid-19. The exception to this policy is consumer credit minimum fees,” the FCA said.
And it noted that mortgage advisers will also be impacted by the revised consumer credit minimum fees, so it was considering merging this with the A fee block so only one minimum fee is paid.
Speed up applications
The application process for newly regulated firms or those joining networks has also been a point of criticism, with JLM Mortgage Services previously highlighting that it has taken six months to process and register new AR firms.
The proposed increase to the application fee for these firms was generally welcomed in recognition that applicants should make a larger contribution towards costs to reduce pressure on existing fee-payers.
However, the issue of performance was raised as several respondents to the FCA consultation “made criticisms of the quality and timeliness of our services”, the regulator said.
“They hoped to see corresponding increases in our efficiency in determining applications and an impact on periodic fees in the future.”
Finalising the increase, the regulator said: “The time is never perfect to increase fees.
“As we said in CP20/22 and some respondents confirmed, we believe FCA application fees are not in themselves significant barriers to entry compared with the wider costs of setting up a new business, including the costs of compliance.
“The fees are intended to recover costs that we have incurred. The revalorised charges would still recover only up to two-thirds of our costs, while the great majority of applicants will pay £10,000 or less, with the lowest fee at £250.
“The potential additional revenue of around £6m would mitigate periodic fees to some extent, but not until 2022/23 and the impact is likely to be small.”
For an industry already reeling from a £17m hit from the Financial Services Compensation Scheme, which landed in the Spring, this will be another bitter blow.
In a consultation paper out this morning, mortgage advice firms and networks growing their adviser bases were warned they must grow their compliance function to match their rising numbers.
In October 2020, the Financial Conduct Authority (FCA) said it will be contacting firms and networks which have grown rapidly to ensure they were still maintaining sufficient oversight. It also continues to examine firms which have multiple trading names to ensure they are not illegally offering regulated advice from unregulated organisations.
Meanwhile, in his response to those proposals and dripping with irony, Sinclair (pictured) noted the team behind the proposals have ‘certainly transformed the approach.’
He said: “It was to be hoped that the new team at the top of the FCA would be better than the group they replaced.” He added that the five weeks consultation period is the shortest in memory with no business plan to ‘underpin the budget’.
He also lamented the fact the new network fee was not consulted on in the November policy proposals giving the industry no time to prepare itself or its own budgets for the huge fee increases. The financial watchdog also proposes significant increases to the minimum fee on consumer credit despite prior assurances, said AMI.
Sinclair pointed out that the regulator is proposing to increase its own budgets with the new application fee hike, but hasn’t rebalanced that with a reduction for the companies already paying fees as on-going costs.
Sinclair said: “It is disappointing that having acknowledged the huge spike in FSCS costs, the FCA is also intent on increasing the cost burden on firms at a time of falling revenues. In apologising for having failed a number of consumers, it is again the good firms who remain picking up the bill.”
Sinclair said that despite finding controls issues among investment and general insurance appointed representatives, a broad brush has been applied without consultation.
“To add a cost of £250 for each Appointed Representative (AR) to a mortgage network without evidence of harm seems unfair. AMI will be challenging this rushed change to the rules and the cost to firms robustly.”
In February this year, during a debate hosted by Brightstar, Sinclair blasted the investment and pensions industry and regulators for failing to get a grip on poor practices which has led to a levy of more than £1bn for the 2021-22 financial year to refund customers.
And he lamented the unfairness of the excess levy being borne by mortgage advisers, which will see brokers coughing up an additional £17m – almost as much as it costs the FCA to oversee the mortgage market for a year.
At the time, Sinclair said: “I was incandescent with rage because this was the darkest day when an industry will have to find £1bn to pay for malfeasance. The FCA has let this happen, it is wrong.”
The FCA was approached but declined to comment ahead of the completion of the consultation period.
This will include greater scrutiny of principal firms and the ARs as they are appointing them.
Principal firms will be charged a flat £250 fee per AR firm which the regulator expects will raise £10m in the 2021/22 financial year.
The FCA has raised concerns about how networks are operating on several occasions, including a Dear CEO letter sent to the heads of businesses in October highlighting major issues.
In its regulated fees and levies CP21/8 paper published today, the FCA emphasised that increasing failings of principals and oversight of their ARs was draining its resources.
“We are increasingly seeing more examples of failings through our supervisory and enforcement work,” it said.
“The range of harms varies considerably – from mis-selling to fraud – but they often stem from principals’ failure to oversee their ARs appropriately.
“The new fee will help fund further work to address these harms in whichever sector they occur.”
‘Increased range of harms’
The FCA is proposing that principal firms pay the AR periodic fee based on the number of their ARs included in the Financial Services Register on the first day of a fee-year, which is 1 April.
Explaining how the sector had developed, the FCA said: “Traditionally, most ARs used the delegated permissions of their principal to sell mainstream products and services – and this generally continues to be the case.
“However, we are now seeing ARs being used in a more diverse range of business models and sectors, including asset management and wholesale activities. Currently approximately half of all principals have just one AR.
“These developments in the use of the AR regime have increased the range of potential harms to consumers.”
It concluded that “we need to do further work at our gateway for authorisations, and in supervision and policy, to address the harms in whichever sector they occur.
“This will include work to determine whether we should consider rules, or legislative, changes.”
The regulator’s work programme will include:
- Undertaking greater engagement with, and scrutiny of, firms as they appoint ARs. This will apply both to new applicants and already authorised firms. The aim will be to understand how the AR fits into the firm’s business model and the FCA will assess whether the firm has appropriate systems and controls to oversee the AR.
- Using a data-led approach, the FCA will undertake proactive supervision of principal firms that may pose a higher-risk of harm. It will use its full range of supervision and enforcement tools to reduce the risks identified.
- Carrying out a range of targeted supervision activity in sectors, or portfolios, where it is considered that the AR regime is a particular driver of harm.
- Undertake analysis, informed by the work above, to determine whether policy interventions, such as rule changes, are required to reduce the harm posed by the AR regime. This could include making recommendations to the Treasury for changes in the legislative regime.
Whichever platform you use, a simple refresh of your timeline offers an endless stream of new posts.
For some brokers social media has offered a sense of community, strong professional networks and encouragement, while others find it unwelcoming and isolating.
What is meant as banter by one person can feel like bullying to another and experiences on a personal and professional level can have long lasting positive and negative effects on users’ behaviour.
Mortgage Solutions spoke to the Centre of Mental Health and six mortgage professionals to find out more about how social media makes them feel, what steps they have taken to protect themselves and the impact social media can have on our states of mind.
Andy Bell, deputy chief executive of the Centre for Mental Health, says: “Inevitably the pandemic has had a huge impact on our mental health.
“Living in isolation or quarantine-type conditions and coping with feelings of insecurity, particularly if you are self-employed or in some other way feeling financially insecure, can have a significant effect on our mental health.
“In some ways the use of social media could make it worse still or be an important way of helping to manage the feelings of isolation, losing a loved one, vulnerability or dealing with added pressures like home schooling.”
Community or clique?
Lots of brokers use social media platforms such as Facebook groups, Linkedin and Twitter to keep up with industry news, share work triumphs and tribulations or to ask for support or suggestions from their peers.
Theo Makris, senior financial consultant at PIA Financial Services, says his membership of a 1000-strong Facebook group for mortgage brokers has been a great source of guidance and a friendly place to ask questions.
“I can honestly say there is a comfortable experience in the group. The group hosts have tried to create a very open platform where even inexperienced advisers can ask the simplest questions,” he says.
“Out of all the social media groups I am part of it is no doubt the most enjoyable and productive.”
Rob Gill, managing director of Altura Mortgage Finance, says he too has found a lot of support from other brokers online.
He says: “At the beginning of the pandemic, people were going out of their way to be kind. If I wrote a post and it sounded like something was wrong I’d get a call from someone who’d read it making sure I was okay.”
However, not everyone feels the same sense of community on social media, and if you’re in not in a group or clique of brokers who interact frequently, you can feel like an outsider.
One mortgage broker told Mortgage Solutions that social media can feel like a lonely place, professionally.
“Unless my tweet is controversial, I find I get minimal interaction from other advisers. Occasionally I ask other brokers for advice but I don’t get much of a response.
“There’s a big mortgage crowd on twitter who are mainly men and just engage with each together. It feels like a club and I’m not part of it.”
Mindful posting
Thinking about how our messages are received by others is a way of showing kindness online, says Bell.
Kala Sreedharan, director of broker consulting firm Alligate Consulting, says she has limited her professional posts in recent months, and instead prefers to comment or support her colleagues with suggestions when they ask for help.
She says she has become more mindful of how her posts might be felt by her followers.
“I recently changed my mind about putting a post [on],” says Sreedharan.
“I was about to share a success story about work on Linkedin and the same day I found out that two of my ex-colleagues were made redundant and that stopped me from posting.”
She has the same attitude on her personal platforms. After a close friend suffered a miscarriage she is sensitive about sharing information about her children and how her posts are worded.
Gill says he avoids tweeting about working weekends or working late in case it makes other brokers feel under pressure to carry on working when they need a break.
He remembers feeling under pressure himself last summer after looking at social media.
“News of the stamp duty holiday had just broken but it wasn’t translating into great numbers for Altura. I was looking on Twitter and seeing everyone else was doing really well which made me think, what are we doing wrong? It depressed me for a week or two but then I picked myself up.”
After analysing his operations, Gill saw a swift turnaround in September.
Instead of posting messages about his productivity, he prefers to tweet about how he likes to relax playing tennis with his children or having a beer at the end of the day.
The unnamed broker says she always thinks how her posts will be received by others and has second guessed herself on many occasions, deciding not to post. She says for this reason her professional social media interaction is limited.
Reality check
Whether you use Instagram or not, you will no doubt have heard of Instagram envy. Users scroll through posts of seemingly perfect faces, bodies, lifestyles and jobs which can lead to feelings of inadequacy or jealously.
Bell uses the term ‘the negative comparison’ effect, which leads you to think that other people are having a much better life than you are.
He says it has not yet been found to be a cause of mental illness but it can reinforce any negative feelings you have about yourself.
To protect his mental health, Makris steers well clear of the platforms where people behave in a such a way.
“I don’t use Instagram either personally or professionally because I believe it has a negative mental impact,” says Makris. “There’s a lot of ‘look at me, look what I have, look how great my life is’.
“It creates a false reality and effects people’s self-esteem, especially the young and impressionable. I feel Linkedin has started to go that way too.”
Sreedharan adopts a sceptical mindset when using social media, which she has found helps her to keep negative feelings at bay.
“People usually put forward the best version of themselves and their successes when writing a post and this includes me.
“There are hardly any people who tell the whole world about their hardships. Just the very knowledge of this has helped me regulate my emotions when reading posts and success stories of other peers in the industry. I am obviously always very happy for them, but no one has a perfect life.”
Dealing with banter and bullies
Being drawn into a twitter spat or receiving harsh comments on your posts is one of the risks of putting yourself out there on social media. But being on the receiving end of unkind comments or bullying can have more longer lasting effects.
Some brokers say they have suffered increased online harassment and bullying from inside and outside the industry and have had to resort to blocking people or closing down their accounts to protect their mental health.
The unnamed broker says she has unfollowed a mortgage professional from a large mortgage company after being targeted by nasty comments.
“Every time I posted on Twitter, he would leave a sarcastic comment. He made me feel stupid because he was a fan of using big words and I’m not because I’m dyslexic.
“Last year I felt I deserved a pat on the back for managing to get through a huge number of mortgages. As I work by myself and there was no one else around to share that with, I shared it with my followers.
“Later that day in his posts, there were sarcastic comments about people praising themselves. I didn’t need the negativity so I defriended him. But it has a longer effect on me, because I don’t feel I can share my successes anymore.”
Mobeen Akram, national new homes director at Mortgage Advice Bureau, enjoys using social media professionally but her personal experience has been tainted by online bullying causing her to withdraw.
“I love seeing support for issues such as diversity and inclusion which brings us all together and I enjoy liking and sharing topical subjects related to the mortgage market,” she says.
“But I don’t hit the like button on personal views which may offend some people.
“I keep my distance on social media. I came off Facebook and have limited my activity after being the victim of harassment from other women.”
Gill says he’s found that some of his connections on social media have been uncharacteristically picking fights which he believes is an indication they are struggling.
To shield himself he’s found it easier to block or mute their posts for now but says he’s looking forward to reconnecting with them again in the future.
“I have reacted but I don’t anymore,” he says. “It’s been a revelation to not respond and walk away.”
Bell concludes by highlighting that we are all responsible for our interactions on social media and we have a duty to look after each other online.
But he emphasises in some ways we have yet to learn how to do that safely and kindly.
In a speech by FCA chief executive Nikhil Rathi at UK FinTech Week, he said it was the regulator’s role to “secure the right balance between a financial sector that is globally competitive, works for consumers, and is secure over the long-term.
“Here, we are drawing on lessons from project innovate, which has shown that once authorised, [digital] firms continue to need higher levels of support from the regulator and, often, enhanced oversight.”
Currently, new technology firms are treated in the same way as those with a long track record. This move aims to culture closer communication post-authorisation to provide support and intervention where needed, said Rathi.
The FCA will also start to invite year-round applications for the sandbox, and introduce a consultative development scheme, which allows digital firms to evolve in step and with oversight from the regulator. So far, over 500 innovating firms have been supported by the regulator, around a third of those that applied, with 137 passing through the sandbox.
Of those, over half successfully completed their test and the regulator said those tests that did not go as planned, they provided intelligence about what works and what doesn’t, without risk to consumers or markets. The products include new ways to pay, insure and access advice and regulatory technology allowing firms to manage the compliance in the issuance of digital assets or deal with anti-money laundering requirements.
This work also informed the regulator’s decision to ban the sale of crypto derivatives to retail consumers because the majority lost money, despite significant price increases in the underlying assets.
Threat to regulate social media and search firms
Rathi said the regulator has already called for the government to better protect financial consumers online saying online search and social media firms need to take responsibility for ads promoting risky or fraudulent investments.
The regulator wants to reverse these firms’ exemptions from the financial promotions regime which expired when the UK left the EU.
“We see no reason why different standards should apply to a search engine or social media compared to a newspaper. If these platforms choose to display and profit from adverts for risky – and in some cases fraudulent – investments, they should also comply with financial promotions rules,” he said.
The regulator will act if these platforms fall short, he added.
Yesterday, the regulator also announced two key digital hires to lead its drive to “build a data-led regulator able to make fast and effective decisions”. Ian Alderton will shortly start as chief information officer and Ian Phoenix as director, intelligence and digital.
The outlook
UK fintech has grown spectacularly with revenue rising to £11bn in 2019 – almost doubling in only four years and accounting for almost 10 per cent of the global total.
This morning, the Bank of England and the Treasury announced plans to set up a taskforce to explore the possibility of a central bank digital currency, according to the BBC.
The aim is to look at the risks and opportunities involved in creating a new kind of digital money, mirroring the value of sterling.
Issued by the Bank for use by households and businesses, it would exist alongside cash and bank deposits, rather than replacing them.
From 26 April, first-time buyers will be allowed to stretch their salaries five and half times in order to reach the mortgage amount they need to buy a home with a ten per cent deposit.
To qualify for a Helping Hand mortgage, borrowers must pick a five or ten-year fixed rate mortgage from its standard range.
A lower stress rate is combined with the 5.5 times income multiple to increase the size of the loan offered by 20 per cent. The society would not disclose the stress rate but said it was a new rate that applied specifically to this range.
The change means a first-time buyer couple with a joint income of £50,000 can now borrow up to £275,000 with Helping Hand, rather than the £225,000 they could borrow previously, assuming a ten per cent deposit and no other costs impacting affordability.
Robust underwriting
Nationwide said borrowers will be subject to “robust underwriting checks”, which includes scrutiny of the amount of unsecured debt on the credit report and a full assessment of the credit score.
If necessary a lower income multiple will offered.
Self-employed borrowers are currently excluded from the Helping Hand deals and while the range has launched to first-time buyers only Nationwide may look to extend it to home movers in the future.
To manage volumes, a minimum single annual income of £31,000 or joint earnings of £50,000 apply, which are inline with average national salaries for the typical first-time buyer age group. The minimum salaries will be kept under review.
First-time buyers using Helping Hand for enhanced affordability will have access to the standard product range, with consistent product rates, fees and features. All first-time buyers benefit from £500 cashback on completion of their mortgage.
Nationwide has set aside £1bn of lending to fund the mortgage range.
Henry Jordan, director of mortgages at Nationwide Building Society, said: “In the UK there are nearly five million private rented households, but many of these renters have dreams and aspirations of buying a home of their own.
“However, with household incomes rising at a slower rate than house prices, many first-time buyers are finding it increasingly hard to get onto the property ladder. Our new Helping Hand option supports borrowers in meeting the affordability requirements, making it easier for them to buy a home of their own.”
Nationwide is currently offering 95 per cent LTV mortgages to its existing borrowers only. It is understood the society is reviewing a wider launch but no plans are yet underway.
