An issue that has been on the boil since regulation was first announced is the use of the term “independent”. This single word has provoked more discussion than perhaps any other asp-ect of regulation in both the IFA market as well as the mortgage inter-mediary market.
If you want to call your firm an “independent” mortgage intermediary in the new FSA world, here is what you must do.
Fees: You must offer your client the option to pay a fee for your services. This would mean they are entitled to a rebate of any commission paid by the lender. So in working out the right fee level, you should take account of the lost commission income and any admin work you und-ertake in managing the rebate process, etc. It is my view that most people do not appreciate the time cost of advice. Most clients will look for a cheaper alternative and you are free to provide it.
Fees and commission: A solution to the problem is a fees and commission split. The client pays a lower fee and you keep the lender's commission.
Commission-only: Of course, some clients may not want to pay a fee at all and are happy for you to work solely on a comm-ission basis. This is their choice. The key, as with much else in regulation, is full and accurate disclosure. Provide the client with the options and rec-ord the what and the why in a suitability letter.
The second aspect of independent is access to lenders. The FSA requires a whole of market choice of lenders or a panel representative of the market.
Naturally, the panel must be properly constituted and regularly rev-iewed but it is an entirely feasible and welcome option for many.
Chris Cummings is director of the Association of Mortgage Intermediaries