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Regulation will cut mortgage advisers by a third, says Pru

The number of tied mortgage advisers will fall by almost a third when full mortgage regulation is introduced as they shift to offering a wide range of loans, says Prudential.

Prudential Premier Mortgage Club national manager John Malone, predicting the shape of the market after the onset of FSA regulation in October 2004, says the proportion of tied company representatives will fall from 27 per cent to 15 per cent.

He believes this decline has already started as advisers which tied to life offices in the 1980s and 1990s to sell regulated products such as endowments are leaving to become independent brokers and advise on complex products such as subprime and lifetime mortgages.

Speaking at the Retail Fin-ancial Services Forum in London last week, Malone said he expects the total number of firms in the mortgage market to fall to around 9,000 from 13,000 and the number of advisers to fall to 30,000 from 40,725 as a result of increased costs and compliance after CP146. Depending on the outcome of CP121, he expects traditional IFAs to account for about 15 per cent of the mortgage market, down from around 37.5 per cent.

But Malone says the winners will be qualified mortgage brokers who will adopt the middle ground between IFA and tied to form about 65 per cent of the market.

He also believes “old-style” networks will lose out in favour of new networks dedicated to mortgage advisers which will have lower charges and can arrange cheaper PI cover.

Malone says: “The reduction will come from the tied and direct side and most intermediaries will either end up IFA or AFA, which may be much the same. The winners will be existing FSA regulated IFAs or AFAs and mortgage specialists who have invested in relevant technology and qualifications.”

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