The mortgage world has resembled a school playground in the last few days as gossip and rumour have followed the Financial Services Authority’s (FSA) announcement that four networks out of the 12 it recently visited have voluntarily agreed to suspend their recruitment of appointed representatives (ARs).
The regulator’s comments have represented a view held by some prominent members of the mortgage network community prior to the report that some had failed to fully comprehend the task of regulation and, worst still, were cutting corners.
Keeping the industry on its toes
Paul Shearman, mortgage proposition director at Openwork, says: “I’m not too surprised as there are a significant number of players who underestimated the level of activity and resources required in the AR recruiting process and the focus needed on the training and competence of their advisers.”
However, while networks have, on the whole, welcomed the critique from the FSA; with Tony Jones, managing director at Pink Home Loans saying that ‘it keeps us all on our toes’, many in the industry have expressed dismay at the regulator’s reluctance to publish the names of the implicated networks.
Richard Griffiths, managing director at Network Data, comments: “It’s most unfair the FSA hasn’t disclosed the four. I spoke to the FSA and it said it couldn’t name names until enforcement action had begun.”
Payam Azadi, head of marketing at Mortgage Times, says: “The FSA has said there are four networks that have had to stop recruiting. That is fine but it involves ‘Treating Customers Fairly’ (TCF) to name who these networks are. If a problem has been found, people should know about it and the networks need to say what has happened, what issues have stopped them recruiting and what they are doing about it.”
Frank Thurlby, compliance director at the GHL Group, believes the FSA is doing the right thing. He explains: “The FSA has a duty with the firms affected not to say who they are.”
Left in the dark?
This confusion has left a cloud of uncertainty in the bright Summer sky but have ARs been left wondering if their network has been affected?
The answer seems to be no. Jason Richardson, director of YooToo Financial Services, explains: “I’m not particularly concerned. If it was my network, it may be of slight concern in that if it is unable to follow the regulations in terms of recruiting, what other areas is it falling down in? However, I’m not worried that my network is involved though.”
Jon Burridge, managing director at Quantum Mortgage Brokers, adds: “This is just part of the natural selection process. If you are going to become an AR, you have always needed to take a great deal of care. It’s not just about fees and share options but the experience and backroom support networks provide as there are massive implications for your business too.”
So if ARs aren’t worried about the findings, what implications are there for the mortgage industry?
Thurlby argues: “There will not be much fallout among ARs once they have checked their network isn’t involved. Although, it’s more indicative for the whole of the market as it’s the most serious thing the FSA has done in terms of enforcement without direct discipline.”
However, Jones believes networks know the risks they are taking and they would be putting their businesses at risk if they didn’t acknowledge them.
“It has sent some ripples through the market among network principals but it’s not a big change. All the FSA said was there were some issues over referencing and some recruiting ARs on trust. It’s very short-sighted if they are waiving references and not checking qualifications and it would be suicidal to take someone else’s word when you are taking on the responsibility for someone’s compliance.”
