Mortgage regulation at the moment could be compared with being at the 18-mile mark of a marathon.
Most of the strong runners have already passed the finishing line by receiving their FSA grant of permission. Some of the field may have dropped out along the way and others are still trying to make it home.
But most mortgage advisory firms are in a position where they can carry on doing business legally within the newly regulated marketplace.
However, unlike a real marathon where the runners slow down and stop once they pass the finishing line, we all have to keep on running just as hard once we start to trade under statutory regulation.
One rather sidelined aspect of this ongoing commitment is training and competence. It is understandable that those who are qualified and fully compliant with the MCCB's competence rules feel that they will also be compliant under the FSA's T&C rules but this is far from the case.
T&C is regarded by the FSA as a highly critical factor in building confidence in the financial system and protecting the consumer and it therefore forms a fundamental part of the regulatory regime.
The MCCB's competence rules covered full and accurate advice and information to clients on matters such as repayment options and their implications, responsibility for insurance, changes in the borrower's financial circumstances and so on. FSA regulation brings a change of emphasis, with high levels of supervision and process documentation being specified and senior management obliged to take responsibility for T&C policy and implementation.
The FSA's T&C rules are covered in its 11 principles for business, its training and competence sourcebook and its rules for senior management systems and controls. What are the most important practical things to put in place to ensure ongoing commitment to and compliance with requirements?
The 11 principles include integrity, skill, care and diligence, management and control, fair treatment of customers, communication with customers that is clear, fair and not misleading, fair management of conflict of interests and so on. Good practice underpins these principles.
In the training and competence sourcebook, five commitments to T&C are specified. Employees must be competent, must remain competent, must be properly supervised, their competence must be regularly reviewed and their level of competence must be appropriate to the job they do. It is evident that passing a one-off exam is not nearly enough to prove that a firm's employees are compliant. Just like that marathon race, employees and their employers have to keep on running with T&C for as long as they continue to trade.
Two elements of the commitments that go way beyond the MCCB framework are review and supervision. The big point to remember is that it is no use doing it unless you keep records to prove it has been done, by whom and when.
The T&C record for individuals must cover the competency of staff to do their particular job, all past experience and training, all training they have received in the current employment and the planned programme for ongoing development. A job description with concise functions and responsibilities is needed and should set out the competencies and skills needed for the role.
One case in point is the process of new employees gaining the necessary qualifications. As under the MCCB regime, trainee or non-qualified advisers have two years from their commencement date (aggregated over all employers and regulators) to obtain the new equivalent to the CeMap qualification, so documenting an individual's start date is critical.
To satisfy both the review and supervision elements, performance reviews should become standard practice, with extra training being arranged where performance has been weak. One of the best ways to satisfy the supervision requirements is mentoring and coaching, which should help to ensure an ongoing ethos of continuing professional development rather than arbitrary competence hurdles for employees to clear once or twice a year.
Individual directors or members of the management team must take responsibility for certain regulatory functions, including the fitness, training and competency of employees and appropriate record-keeping systems. For the management team, the documentation must include a document that specifies responsibilities within the organisation for making sure that T&C activity meets FSA standards and continuously improves and evolves in line with the business environment. These elements must be well managed, so a T&C manual incorporating an organisation's policy and procedures is a must.
Perhaps more than any other aspect of FSA regulation, greater investment in T&C will quickly translate into better performance. Knowledgeable, enthusiastic and committed staff will grow a firm's reputation and its income levels. So the sooner you get your T&C systems up to scratch, the sooner you will start to enjoy returns on your investment.