The cost of ‘professionalism’ or training and qualifications are likely to be the biggest single cost to the mortgage advice sector. Research firm Oxera estimates the industry may have to absorb anything from £17 to 28m.
All advisers will have to hold a Level 3 qualification, the equivalent of CeMap, which could mean costs of £3-5,000 to train up each non-advised seller froma standing start. This rises to £5,600 taking into account loss of time.
Labelling, or the costs associated with changing the service labels for mortgage advisers from advised and non-advised to the RDR labels, ‘independent’ or ‘restricted’ are the next biggest on-off cost at an estimated £17m.
The FSA said it expects whole of market firms to transfer across to the ‘independent’ label, with limited or single-product firms to re-label themselves ‘restricted’ services.
On the whole, the regulator’s cost-benefit analysis suggested smaller firms will shoulder more of the burden at £1.4m compared to very large firms at £1.6m.
Replacing the Key Facts Illustration (KFI) or Initial Disclosure Document (IDD) could also bring £1.7m of costs to firms, with a £0.7m ongoing bill.
The regulator has no plans to make all mortgage sales advised, it confirmed, but said average costs to firms would be “quite small” for firms getting ready to introduce “appropriateness assessments” because many already offer similar documents.
This consultation paper (CP10/28) is the third following the MMR discussion paper published in October last year. The first two CPs dealt with ‘arrears and approved persons’ and ‘responsible lending’.
This paper deals with ‘distribution and disclosure’ and the consultation will close on 25 February 2011.
