The advent of mortgage regulation under the auspices of the FSA is the greatest challenge facing the sector over the coming years, says Legal & General's director of housing marketing Stephen Smith.
In the 25 years he has been in the industry, Smith believes this is the biggest shake-up the sector has seen but he fears that the FSA and intermediaries have underestimated the amount of work that will be involved in the changeover and is calling on intermediaries to do as much as they can to be prepared.
“There is a tsunami of change on the horizon. It is a major challenge, especially for small businesses, to understand and appreciate what will be required of them.”
He compliments many of the initiatives the FSA has undertaken, especially in the area of mortgage applications and the creation of a high-street firms division, but believes the regulator needs to go further with its plain English policy.
“FSA consultation papers are extremely difficult pieces of documentation for small players to come to grips with. It is a steep learning curve for the regulator to understand its audience. It is making progress with roadshows and the like but it needs to make sure that the message of the importance of compliance gets through.”
Smith is concerned that, with such a rigorous timetable for the arrival of a regulated market, many intermediaries may not have a good enough understanding of what is expected of them. To aid in the transition, L&G is publishing guides to regulation for its business partners. It also conducts briefings and debates to try and bring a better understanding to the industry.
“There has never been a greater pace of change than what the industry is facing now. The message to all our business partners is that now is the time to get prepared.”
Smith is a firm supporter of the newly formed Association of Mortgage Intermediaries, believing it is a step forward that the sector now has its own intermediary trade body.
“L&G Mortgage Club came on board from the very beginning and we do our best to promote membership in the AMI. We believe there is a definite need for intermediaries to have a strong and independent voice.”
Smith believes that regulation will be the impetus for a certain degree of re-engineering across the sector. Once intermediaries come to grips with the amount of work and restructuring that regulation will mean, he believes they will see the need for some form of consolidation or networking. Even on the lender side, he believes there is the possibility of consolidation but maintains that if the smaller, regional lenders are able to provide value in a niche area, then they stand a good chance of succeeding in the new marketplace.
A supporter of regulation, Smith is nonetheless curious about many Government initiatives, none more so than Chancellor Gordon Brown's fascination with long-term fixed-rate mortgages. “It is an interesting move for the Government, kind of like telling the public that they should eat five portions of fruit each day. Although many would agree that more long-term fixed-rate mortgages is a healthy idea for the economy, I cannot see it taking off en masse.”
He explains that consumers generally do not sufficiently value the certainty provided by a long-term fixed rate to pay the extra amount it would cost. “They are valuable but in many cases I do not think they fit most Britons' lifestyles. Most people view cash saved today as more valuable than cash saved down the track. The UK public are used to the concept of remortgaging to adjust to their lifestyles and I do not think they would take to fixed rates as much as people do on the Continent.”
Smith seems to be something of a student of culture. He took part in a high-school exchange programme in France when he was 16 and has kept a close association with the friends he made. “I love travelling and I think staying with people in the community gives you a much better understanding of a culture.”
In 1988, he was part of a Rotary Club goodwill exchange to Australia, where he looked at business practices. “It was an eye-opening experience. One thing that I think I bought back from it was a greater ability to work rapidly in small project teams. I was very impressed with the country's flexibility and advanced attitude to change within the financial services sector. Even in 1988, they were making a lot of progress in the use of technology that the UK is still yet to make.”
Smith believes that although Britain is very advanced in many respects, there is a lot that financial services in the UK can learn from markets in other countries and regions.
“One of the things you begin to realise when you travel is just how differently other cultures view the same problems that we all have. There are many similarities, of course, but I think that some of the innovative ways that other countries view business problems could work just as well here at home.”
Born: Country Durham, 1957.
Lives: Near Guildford, Surrey, with his wife and two children.
Education: St Peter's School, York; University of Leicester (biology).
Career: 1978-89 Abbey National; 1989-92 The Mortgage Corporation; 1992-94 Home Loan Management; 1994-98 Legal & General mortgages; 1998-present Legal & General housing propositions, director of housing marketing.
Career ambition: “Continue to learn and be challenged by new opportunities and make the best use of the experience and talents that I have.”
Life ambition: “Keep a good work and home life balance. Provide the best I can for my family in time as well as money.”
Likes: Good food, especially curries, good books, comedy, Radio 4, Marmite and France.
Dislikes: People with no sense of humour or perspective, hot days in London, the M25.
Drives: Ford Galaxy (“The perfect taxi for the family”).
Peers say: “The most knowledgeable person I know in the housing market and a safe pair of hands.”