The FSA has already opened its doors to firms seeking regulatory approval to operate in the homereversion and home-purchase plan markets.
From November 6, firms acting in these areas have been able to apply for permission to operate when regulation comes into effect on April 6 next year.
However, brokers and providers should perhaps take more note of March 23, which is the last date that they can submit their application for permission to continue doing business.
The bottom line is that practitioners do not have much time to get their house in order, submit their application and demonstrate their competence to work in this market.
New brokers coming to the home-reversion market after regulation will have to pass an appropriate qualification before they can work unsupervised with clients. In light of rules from the European Union, it is no longer possible for the FSA to set a time limit by which these individuals must have gained their qualification but until they have done so, they must be supervised.
However, for those already operating in home reversion and who have been deemed competent to carry out business, there will be a two-year window after the start of regulation in which they will need to pass an appropriate qualification. This is the same approach that was taken with regulation in the lifetime mortgage market and should present no problems.
For those who operate across both the lifetime and home-reversion markets and already have a qualification for lifetime mortgages, the FSA says they will only need to do a top-up module to extend their permission for reversion schemes. The two-year window will apply and appropriate qualifications for both the top-up and full-blown papers are waiting in the wings.
However, while this testing takes place in the homereversion market, the FSA does not believe that such exams will be necessary in the home-purchase plan sector and brokers advising on Sharia-comp-liant products will not have to pass a qualification.
The FSA says it took the size of the market and its principle-based regime into consideration but it adds that firms are free to impose their own detailed requirements and put staff through qualifications.
This seems to create an unnecessary tear in the regulatory fabric and while the market is small, it may have been advisable to insist upon a qualification for home-purchase plan brokers to create continuity in the regulation and safeguard against accusations that practitioners are poorly controlled in this sector.
Certainly, the market is complicated enough to merit such a qualification and having one in place would help create a benchmark in the technical knowledge of those advising on and providing the products in question.
Concerns may prove unfounded if brokers get a qualification to prove their competence anyway and many firms will be looking to have a structured training programme to prove the ability of their staff.
The FSA says it aims to promote efficient, orderly and fair markets and help retail consumers achieve a fair deal. Although the home-reversion market has been in existence for a good deal longer than many parts of the home-purchase plan sector, both are in their infancy in terms of potential.
According to Datamonitor, the Islamic mortgage market in the UK will be worth 1.4bn by 2009 and over the last six years has grown at an annual rate of 68 per cent.
Home-reversion schemes have endured much harder times over the last six years. Figures from Safe Home Income Plans show that its members completed 227m-worth of homereversion business in 2000 but this level has fallen dramatically since then and in 2005, only 55m worth of business was done by members in the sector.
There are many factors that have contributed to this fall but it seems unlikely that it will continue, given the developments that have been made in the products on offer and the growing reliance of the population to fund retirement through bricks and mortar assets.
Both these markets are set for much bigger things in the years to come and while they have a small client base at the moment, it is expected to increase dramatically in the future.
If the FSA finds the right measure in its regulation, then it should, in partnership with lenders and brokers, be able to achieve the efficient, orderly and fair markets it is seeking.
There have been a number of issues in the reversion market and this is an excellent opportunity to put them behind us. It is also a wonderful opportunity to set the home-purchase plan market off on the right foot and avoid many of the problems that have engulfed so many other fledgling sectors over the years.
There is less than five months before these two markets come under regulation and a lot of work to be done in preparing for April 6. Client confidence and broker expertise will play a huge role in seeing home reversion and home purchase plans take off. Regulation can help deliver that confidence and those who embrace it and the competence it demands will be best placed to serve themselves and their clients.