It is a firmly held belief within our industry that it is nigh on impossible to become regulated for advising on mortgages by applying direct to the Financial Conduct Authority, or FSA as was. Time and time again when interviewing brokers I come across this view and it is stated almost as fact by disillusioned advisers that joining a network is the only route available to them.
We have all seen the drastic decline in mortgage adviser numbers and there is without doubt a benefit to be had here. The weaker and less able have left the industry, thus raising the overall standard from the bottom up. A lot of the advisers who have left are from smaller firms where the burden of regulation, in both time and cost, has become too heavy for them to continue and they have decided to call it a day.
Networks offer a great solution to the one and two man-band type of operation but there is a question how long this can last. Networks themselves are visibly under pressure to improve their control systems, which at the coal face, are far less rigorous than the requirements placed upon an adviser in a directly authorised firm. The capital adequacy requirements required for a multichannel distribution network are significant and when combined with the low volumes of business most advisers produce are unsustainable. We have already seen several networks raise their fees significantly and I am sure we will see further increases in the months to come. Quite simply the days of a light touch, low-cost route to authorisation under the umbrella of a network are gone.
Networks certainly offer a much less rigorous route to authorisation but I predict that more and more firms will want to explore the option of leaving and becoming directly authorised as charges go up. Certainly I would not wish, as a small firm, to be solely responsible for bringing in new business, advising clients, and overseeing regulation, it is no longer a one-man-job. But those firms where there are sufficient economies of scale to appoint experts in these areas will and should be made to feel welcome by the FCA and be encouraged to become directly authorised. The accountability of the adviser is absolute in these situations and I believe further raises the standards within our industry. I believe more and more we will see networks providing a much needed stepping-stone to direct authorisation and as such could justify higher costs to provide this.
Our industry desperately needs new blood and we should be doing all we can to encourage principled and educated people to embark upon a professional career as a mortgage adviser. The FCA needs to get the message out that it is open for business for direct authorisation and that while the standards are rightly high, they are obtainable by even the smallest firms.
Martin Wade is director of Your Mortgage Decisions