Name: David Sheppard
Company: Perception Finance
Although the UK is coming out of recession, the mortgage market is still very fragile and it is no surprise that the number of authorisations has fallen although Q4 figures are a bigger than expected drop after three fairly consistent quarters in 2009.
Naturally, the time of year has a lot of influence on the figures, as the run up to Christmas is generally a quieter time for the market and this is going to directly affect the numbers applying for authorisation. However, this is not the only reason.
Those that are currently working under a network will probably sit tight for a while longer, and anyone considering to start afresh in the industry will not make that leap until we are a bit further out of the recession. We could well see an increase in numbers this year, but this will depend on how soon the feelgood factor comes back.
When the numbers do start to pick up again, I would expect there to be more people applying to be an appointed representative than to be directly authorised. While the latter does allow greater freedom, the former provides regulatory support at a time when the industry is ever-changing.
The lower number of authorised brokers will mean that, as the market does pick up, there will be more business for those that have weathered the downturn and even though there will be new entrants coming in, customers will be looking to the established and experienced names to guide them through what is still a tough lending market.
Name: David Thomas
Company: Chadney Bulgin
Considering the scale of this recession, it is unsurprising to hear that authorisations have diminished for both mortgage brokers as well as IFAs.
But are the numbers simply due to the market or are they further depressed, and if so, why? The answer seems a definite yes, and this could be potentially very damaging to both the IFA and mortgage markets. Traditionally, the broker market evolved from successful advisers becoming disillusioned with corporate life, and starting their own operations. Increasingly, the FSA is making it harder for this model to gain authorisation, looking for firms to have appropriate business structures.
Further, under the Retail Distribution Review (RDR) proposals, advisers will need to be qualified to QCF 4, a huge study requirement, meaning many will exit the industry before the deadline of 2012. This will become a significant barrier to entry.
So what does it mean for the market? The Association of Independent Financial Advisers and the Association of Mortgage Intermediaries realise that this could reduce broker numbers sharply, perhaps to the extent that the industry itself is threatened.
Many firms see this as an opportunity to acquire clients, but if the number of firms and advisers declines too greatly, combined with a lack of new authorisations, will the great British public overlook us anyway?
In this difficult market, advisers must ensure our clients will continue to value truly independent advice, while seizing opportunities the market offers in building further scale.
Name: Jock Cassidy
Company: Ashley Law
Authorisations will continue to fall. Last year, Italians spent £5bn on consultancy fees to assist them to plan their futures but the irony is that the fees were paid to fortune tellers and not financial advisers.
However, you do not need a crystal ball to work out the risks posed to the independent sector. Light-touch regulation is a thing of the past, the RDR poses many threats to firms’ viability, lenders understandably have been milking the mortgage funding famine and a recent survey revealed that less than 5% of consumers are prepared to pay over £100 an hour for consultancy fees.
No matter how many IFAs and mortgage brokers may claim to love the job, they have financial commitments, and if their profits are insufficient, why should they risk being saddled with liabilities, especially with customers’ relying more on the services of the Ombudsman when markets crash?
Many financial advisers will be attracted by the shelter of networks or larger IFA firms – particularly for those on the wrong side of 50 who are unwilling to study for higher qualifications and many optimists hoping RDR proposals will be watered down with a new party in Government.
A decrease in the number of brokerages augurs well for stronger firms able to weather the storm, but if the number of individual advisers does not decrease arguably there will be no significant impact. The real losers of less independent advisers will be the consumer.
