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AMI: Regulation costs brokers £20,000 a year


Association of Mortgage Intermediaries director Robert Sinclair (pictured) says regulations cost mortgage brokers around £20,000 a year.

Speaking at the Mortgage Business Expo in London today, Sinclair said he was asked by the Treasury select committee to calculate the cost of mortgage regulation to brokers. He said he is unable to give a figure for the cost of new regulations, including the MMR, but added that current regulations cost £20,000 annually.

He said brokers pay £5,000 in regulatory fees annually, plus £9,000 in compliance costs. He said advisers lose an additional £6,000 pounds a year through lost office hours when they are conducting compliance work.

He said: “It means in order to trade you need to make £20,000 profit before you begin to generate income.”

Sinclair said the industry must accept increased regulation as a result of its past failings, but insisted that the total cost is disproportionate.

He said: “We have to accept the cost of having not policed ourselves very well, and we are all guilty of that. We relied on a regulator to do it for us.

“We are going to have to swallow that pain I regret but perhaps not to this degree because that cost is far too great. Proportionality is what regulation must have.”


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There are 14 comments at the moment, we would love to hear your opinion too.

  1. I don’t buy this at all. Many of the measures are prudent and make sound common sense. The mortgage market has changed – the old days are gone. Live with it, evolve, adapt and thrive – or go the way of the dodo

  2. Someone needs to get a grip of what mortgages are all about. Banks do not play on a level playing field and very rarely is a mortgage sourcing system perfect.

    However, I do thnk Robert is not quite with it and his so-called charges. This is just to scare people and to try and justify his existence. By the way, does he hold Cemap, has he arranged mortgages and if not why not?

  3. Dear Martin,

    I hope you show more sympathy to your clients than you do to your peers – or is your client bank so large that these changes won’t affect you?

    No-one, I repeat no-one can argue against the reasoning for implementing changes to the mortgage regulatory landscape, but I fail to see how lumbering advisers with a £20k pa bill JUST TO TRADE is good for anyone.

    I won’t hold my breath to hear how the FSA is going to increase the fees for the high street banks who got us into this mess.

    Well done FSA, you’ll consign another independent mortgage brokerage to the history books if you follow through with this.

    Thanks a lot.

  4. what i am having difficulty with is not the fact that there is a requirement for compliance and regualtory costs & associated time. Quite frankly, I frame all the news paper cuttings and decorate my office becasue when a client asks why our fees are so high I simply point to the press cuttings. The point I dont get is the two tier system. Firstly you have the independants who seem to carry the majority of the costs ultimately for providing clients with a choice, then you have the tied lot who represent just a few or even just 1 lender and product. The tied lot seem to get away with sheer murder in the sales process, but ultimately the client looses out.

    Perhaps the answer is to banish all advice, that way there will be no requirement for advisors and regulators and just place mortgages and fianncial products in tescos and see what happens.

    Sounds stupid, but it makes practical sense.

  5. The tide of opinion within the industry certainly seems to be changing against those, like the AMI and the CML, who just seem to want block change.
    The MMRs proposals that customers should be able to afford the loan and that income should be confirmed are hardly outrageous now are they?
    I don’t think the proposals will cost good intermediaries or lenders much at all because they’ll have been doing most of it already. And like many people in the industry I’m not going to lose much sleep over those that aren’t and who contributed to the problem.
    What we need is for the FSA to stop talking and start implementing – then we”ll all have the certainty we need to move forward.

  6. Welcome to world of the IFA

  7. It’s interesting that only the banks will be able to afford the extra costs. It’s ironic that all illustrations issued by Bank clearly state that Advice is not being provided. When will the FSA learn the banks are a bunch of profiting making so & so’s that don’t care about customer service and only care about their bottom line

  8. If mortgage brokers were advising clients properly already, and (this is the important bit) ensuring their files show the client’s details and requirements, product research and gave a full written advice recommendation for the mortgage, then there wouldn’t be any additional compliance costs!

    So if people are whinging about their supposed massive extra costs, sadly it shows they can’t be doing the job properly.

  9. By the year end approx 70% of mortgage brokers will have ceased trading. Regardless of the rights and wrongs of the FSA the increase in costs to implement MMR will cause the remaining 30% of brokers look very hard at the “sweat to bread” ratio to remaing trading. I won’t be surprised if a higher level of mortgage qualification will also be required just to add a little extra pressure.

  10. “[B]rokers pay £5,000 in regulatory fees annually, plus £9,000 in compliance costs. He said advisers lose an additional £6,000 pounds a year through lost office hours when they are conducting compliance work.”

    OK, so the last £6k is an opportunity cost and can’t be accounted for like that.

    “It means in order to trade you need to make £20,000 profit before you begin to generate income.”

    No, it means in order to trade profitably you need to generate more than £14k income.

    Sheesh! If this is the quality of mortgage advisers I’m not surprised they’re going out of business…

  11. I think Adam Smith is not the economist and quite clearly he is not the one that has to earn the extra £14,000 per annum, Also, it looks as if he is not a mortgage broker and never has been one.

  12. Just a thought, where do the FSA employees go for financial advice when looking to invest their bonuses. Do they go to their bank or do they seek Professional Independent advice, and what will they do when they have succeeded in decimating the IFA industry

  13. Quite right POIFA; but I have done insurance broking, tax consulting, regulatory consulting, corporate finance, and worked in regulation – not in that order – with a chartered qualification and a relevant post-grad under my belt – so I’m not exactly a one-trick pony.

    Being a mortgage broker is just like any other business – if it’s not working for you, the economically rational thing to do is to find something with a better risk/reward ratio. No-one’s got a job for life these days, that’s just the way of the world – and I’m old enough to remember a different one.

  14. Anyone who thinks that a mortgage broker can operate without confirming income and completing all the compliance requirements including a suitability letter explaining the reasoning for the advice, quite plainly doesn’t know what they are talking about.

    Why is it that some IFA’s have their heads so far up their own rear ends?

    I pay my fees to the largest provider of compliance services to Financial Professionals in the UK and adhere to every piece of compliance thrown my way.

    Ironically the same firm probably deals with your compliance as an IFA as well.

    So, if you please, do not denegrate my role in financial services simply because you choose to tarnish every mortgage adviser with the same brush.

    To be honest, I’ve come across more dodgy, churning IFA’s than I have mortgage brokers.

    End of rant. So please, instead of turning on each other, can we direct our attentions to the FSA, who clearly don’t have a clue?

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