Talk of reforming or abolishing the FSA may simply be political grandstanding and I am not sure that a great deal will change above some cost-cutting in places. Politics is something which, despite us all having a mandate for change, is pretty removed from day-to-day life as an intermediary. But, in earning a living in this industry, there are other concepts which we can influence – those touching on performance, profit, polarisation and protection.
Network Data’s demise is now bordering on a Bonfire Of The Vanities’ equivalent for the financial services industry and, with £5m of unpaid appointed representative commission having metaphorically gone up in smoke, it is clear that the ramifications of this event will affect us all, primarily because lenders will now make even more circumspect decisions as to which intermediaries they deal with.
Elsewhere in the sector, break-even has become the new profit. In such a climate, it is ironic that it appears to be the smaller businesses that are performing better. We have all heard the analogy that characterises the agility of big businesses within the context of an oil tanker’s turning circle But it rings true.
When it comes to making strategic errors, my copybook has as many blots as the next guy. But many intermediaries got themselves into red ink by ignoring some elementary warning signs as the market bubble was inflating. These included not having a sensible balance between employed and self-employed staff, operating regional centres with unnecessarily high fixed costs and concentrating too much on singular revenue streams such as non-prime, self-cert and, certainly in the bigger conurbations, portfolio buy-to-let work. These product suites produced fatty levels of profit in a roaring market but bred complacency, particularly in the area of brokers not advising on a borrower’s protection requirements.
It is timely, therefore, that product providers are now earmarking up to £5m in a war chest to create greater consumer awareness of protection planning and a proportion of the money should go towards better training for advisers themselves. This is particularly relevant with the RDR approaching because there is more than enough anecdotal evidence already to suggest that polarisation will set in between those advising on, say, investment products and those simply selling protection productsThe bottom line is that it has taken the worst recession in 50 years for countless mortgage brokers to wake up and understand the importance and commercial value of mortgage protection. An earnings’ necessity has made a virtue of it and the hope is that as we emerge from this period the newly formed habit will stick and we do not return to the dark ages of being specialist lending junkies.
Kevin Duffy is managing director of Mortgageforce