Name: Alan Lakey
Company: Highclere
The FSA has said that its figures were not reflective of the relevant risks and costs of supervision in previous years. There are two distinct matters here. One is the degree of supervision required for a particular sector, and the other relates to the financial risk posed by different sectors.
Undoubtedly, it costs more to supervise and regulate small entities such as brokers, and the FSA will point to the recent increased enforcement in the mortgage broking arena. Practitioners will point to the limited scope for financial mayhem by comparison to a large insurer or bank.
One point less likely to stimulate an argument is that the FSA is an expensive, overmanned and cumbersome organisation that has no respect for and understanding of financial budgeting. One reason for the fee increase is to recover the cost of setting up the Consumer Financial Education Body. Practitioners will again bemoan having to pay for an endemic failure within the UK education system.
Increased costs for mortgage brokers will prove most unwelcome at a time when the market has yet to significantly recover and at a time when the FSA aims to limit borrowing by proscribing self-certification. The CP10/05 paper also provides a warning that the final fees will only be known after the May board meeting and may ‘vary materially’ from those intimated.
The good news is that this is still at consultation stage, so there is scope to redress any imbalance. The bad news is that FSA consultations seem similar to those operated by local authorities, where a decision is made first and justified later.
Name: Robert Sinclair
Company: Association of Mortgage Intermediaries
For most brokers who hold another authorisation, which may be in investments or general insurance, the change in minimum fees will make little difference, as they were already paying more than the new minimum.
However, for those that hold a mortgage authorisation only, their case is that this new threshold of a viable minimum base contribution is a statement rather than an argued case.
Therefore, most smaller directly authorised firms will not see much additional cost. What will surprise people when they see their bills will be that the costs of the new Financial Education programme will be itemised separately. This will cause more than a few raised eyebrows.
The losers in this new regime will be the firms that are in networks. The 33% increase in overall mortgage regulation costs seems large. The weighting of this onto larger firms by removing the fee taper and straight-lining costs will impact mainly small firms in networks, who will see their FSA bill double. The only rationale offered for this is that those firms had been under-charged in the past and this is now being rectified.
At this time, where many firms are re-adjusting their business models to reflect the new economy, such increases do little to help support staying in our industry. This is not good for consumers, and ensuring consumers get a good deal is a key objective for the FSA. AMI does not think its members should pay for outing those brokers who should not have been allowed into our industry in the first place.
Name: Ray Boulger
Company: John Charcol
The FSA has not provided robust evidence of an increase in the cost of regulating mortgage brokers in proportion to the proposed fee hike. Perhaps the reason for not providing adequate evidence is that this would have been too challenging for it.
How the private sector responds to a financial crisis and how the public sector responds are a world apart. The FSA’s 10% fee hike for the coming year – on top of last year’s rise which was way above inflation – demonstrates this difference even more clearly than most of the Government’s reaction to the recession.
Everybody involved in the mortgage market knows only too well that the huge reduction in activity since 2007 has resulted in a major reduction in income, and so nearly all brokers have had to cut costs dramatically in order to survive. The acceptable level of costs for any firm is dictated largely by the expected income.
However, when the FSA sets its budgets, this process appears to work the other way round. First it decides where to expand its operations, rather than what it can cut back on. Then it calculates how much extra funding it needs to do this and then how to allocate these extra costs among its hapless customers.
I fear this 2010/11 budget is payback for the success which AMI and its members had last year in persuading the FSA to cut back to an average of 2% on the original 20% increase which was proposed for brokers. It seems that brokers will have to fight again this year for a more equitable allocation of fees.
