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.