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Independent view

So the advent of mortgage regulation is upon us.

As I pondered the changes that we may have to make as advisers to remain compliant (if we have to change at all),I wondered how much the mortgage industry as a whole will evolve.

Regulation may sort the wheat from the chaff and judging by the amount of advisers that have still not registered for the update, I suspect that some may withdraw from the market altogether.

To be honest, I am not totally averse to legislation. The number of hoops that we have to jump through to protect the consumer is already more impressive than a circus act and so one more probably will not make that much difference. Rules and compliance are, after all, there to protect us as advisers as well.

It is likely that we will have to change our working practices significantly to enable us to remain truly independent. Alliance & Leicester has announced that if a company does not submit at least 10 mortgage applications per month, then it reserves the right to reject any new proposals.

Lenders have to protect their businesses and pay for the huge costs involved in regulation but does this really make for a better marketplace if we are restricted as to where we can place our clients? Over time, will our “independence” suffer as a result? I suspect so.

Another lender I know (who shall remain nameless for the time being as I was told in confidence) is thinking of withdrawing from the equity-release market as they anticipate that this type of lending will eventually prove too costly for them to administer. Shame really, as they have a great product. Who is the winner in this scenario? No one. Neither the lender, the adviser nor the consumer.

What I was hoping would change is that ridiculous rule that if a mortgage does not proceed, the maximum that an adviser can charge for advice is £5. I wondered where this rule originated from, as no one seemed to know.

I rang the source of all knowledge – the FSA, of course – who referred me to three separate helplines. They in turn, eventually, referred me to the Department of Trade and Industry, who passed me on to the Office of Fair Trading and the Consumers’ Association. None of these agencies could accept responsibility for this rule, nor did they really have the faintest clue as to what I was harping on about.

Having said that, the Office of Fair Trading came out at the top of my list by actually returning my call and then explaining that, yes, the rule still existed, no it wasn’t going to change after M-Day, and no, it wasn’t them who had made it up in the first place.

Someone, somewhere is having a laugh.

I have a client who is currently, through no fault of her own, on her third mortgage application within 18 months. The amount that she is borrowing is tiny and we had agreed to work on a fee basis.Her various purchases have fallen through, much to our mutual frustration. The amount of hours that have gone into this lady’s pursuit of her dream home is on three pages of a timesheet and under the “rules” I am not allowed to charge her more than a fiver as none of her mortgages has completed.

I have calculated that in this case, applying the FSA rule, my time works out at 20p an hour, which is well below the minimum wage. I explained this to the chap on the FSA helpline, who almost triumphantly exclaimed that it was OK, because I could actually charge £15, as there had been three mortgage attempts. I lost the will to live at this point.

In all seriousness, perhaps I am missing something crucial but why shouldn’t advisers be remunerated for their expertise in finding a suitable mortgage for a client from the 10,000 that are available in a daily changing marketplace, whether the mortgage proceeds or not? Is this really so controversial?

The whole point of being fee-based is that clients receive good quality impartial advice on what is feasibly their biggest purchase. Most are grateful to be guided through the mortgage maze and most mortgages do proceed. We can charge a fee if someone does not proceed with a £50 a month pension but not for a £130,000 mortgage.

Whatever the reasons why this £5 rule exists, it is high time it was amended to a much higher figure, even if that figure is discounted against normal fee rates. Perhaps the FSA would like to charge 20p an hour for processing our regulation registrations?

Fiona Sharp is senior adviser at Finance4Women

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