What is more likely is that within the existing tripartite structure the seats of influence will simply be re-positioned and the FSA will survive long enough to oversee the implementation of the retail distribution review and other related legislation.
To that end it remains crucial that our trade bodies continue to lobby passionately with the FSA on matters such as the mortgage market review which will take on added relevancy in October when opportunistic and often ill-informed politicians will be looking for fresh cause célèbres amid slowly improving house inflation data and early signs of economic recovery.
Our own trade body, the Association of Mortgage Intermediaries, has performed exceptionally well in recent months and I would encourage all brokers to support its positions on the key issues as they garner debate. My personal view on these would include the following:
Product regulation -This concept may thankfully already have one foot in the long grass. Vince Cable has distinguished himself during the crunch but this is one of the Liberal Democrats’ less durable proposals. I would be surprised if the FSA does not appreciate already that this is the wrong solution to the wrong question and that it cannot solve a retail issue without firstly addressing structural wholesale funding challenges. And besides which, with the voter that is Mondeo man typically indebted at a level above 75 per cent loan to value it would be political suicide to further stymie his ability to remortgage as payment shock becomes a national occurance in the year ahead.
Channel definitions – These need complete revision. Only the infamous Humphrey Appleby of Yes Prime Minister fame (or more likely Baldrick from Blackadder) could come up with terminology such as “whole of market” which has come to mean anything but that and then follow it with a definition of “independent” which contains a mandatory fee charging constituent! With regard to the former, the tag line “representative of” needs to go. The whole glossary of labels presently used needs tearing up. You cannot be half pregnant. My fear however is that because the large mainstream banks fund so much of the FSA’s cost (to say nothing of the wider economy via jobs and corporation tax revenues) there will never be a playing field on which they are not advantaged in some form or another.
The FSA is only now finally getting to the kernel of so many related mis-selling phenomena – i.e. that there is a critical difference between advised and non-advised sales processes – and hopefully it will accept a degree of mea culpa on this and concede that in the wake of a deep recession and employment figures at three million, this country’s population needs affordable and objective advice channels, not a regulatory environment within which bancassurers go on to repeat the mistakes of earlier decades.
Finally, there is the matter of factory-gate pricing. This is arguably one of the most desirable outcomes required but one which is not straightforward to implement. Commission disclosure has come a long way since a time of the dark arts in the 1970s and 80s when inflation (and ergo, strong year-on-year investment growth) disguised what were some appalling practices around charging structures across the industry. The challenge here is that the mortgage industry is not homogenous. There are countless different business models out there and no single formulae appears to be omnipotent. So whilst factory gate pricing is an ideal to be strived for, how it becomes ingrained in a disciplined, commercial and consistent way across all of these operating models will be challenging, but well worth the effort I believe.
Kevin Duffy is managing director of Mortgageforce.