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FSCS funding changes just ‘a starting point’ – AMI

  • 15/06/2018
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FSCS funding changes just ‘a starting point’ – AMI
Revisions to the Financial Services Compensation Scheme (FSCS) funding model which will see brokers paying an estimated £30m less from April next year are just the beginning of beneficial adviser reforms to come, the Association of Mortgage Intermediaries (AMI) believes.


The changes to the FSCS funding arrangements were announced last month and will see several reclassifications of intermediaries, with insurers and providers contributing 25% of the fees in some classes.

Speaking at the trade body’s annual dinner last night, AMI chairman Martin Reynolds welcomed the move, saying: “The key point is that this is acknowledged as a starting point and not necessarily a final resting point.

“From April 2019 mortgage brokers will no longer have to pay for mistakes in pensions and investment businesses.

“AMI believes that this is a significant win for mortgage brokers moving forward and a common sense outcome from the regulator,” he added.

AMI chief executive Robert Sinclair (pictured) added that he believed the changes would save brokers around £30m per year from April.


‘Astonishingly good’

However, AMI leaders also highlighted significant concerns with the Financial Conduct Authority’s (FCA’s) Mortgage Market Study interim report, particularly an over-emphasis on price rather than service and customer outcomes.

“Can you think of another industry where 70% of consumers end up with the appropriate best priced product?” asked Sinclair.

“I think that’s astonishingly good. But we’re about to try to break that up because they want to change the way we operate – they want to talk about the way that prices differ.

“They also want to build an eligibility tool which includes criteria, sourcing and affordability to allow consumers to go all the way through the journey to perhaps a very shortlist of products and then perhaps the choice to self-select on an execution only basis.”

Sinclair highlighted that frequently consumers start with an idea of what they wanted but after discussing their situation with a broker this would identify what they needed.

“So I would council caution about breaking up a market where 70% is right to help satisfy the 30% who might be disadvantaged,” he added.


Wrapped around advice

Reynolds echoed many of these fears, saying: “AMI would urge caution on the regulator to not use the outcomes of the study to unpick the benefits to the consumer that the Mortgage Market Review (MMR) gave.

“Advice should be at the heart of the mortgage and protection process ensuring that people can not only afford the property but that they are also adequately protected so they can remain in the property for the long term.”

He added: “We fully understand that we need to invest in technology to improve the customer journey, but we need that technology to be wrapped around the advice process and not used instead of the advice process.”

He also urged the regulator to take greater interest in the phoenixing of firms and continued regulation of individuals that have caused consumer recourse via the FSCS.

“These are key areas that we need to be addressed if we are to provide confidence to the consumer in our fantastic industry,” he said.


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