MI was told the FSA’s investigation was not to determine how much brokers are being paid but rather to look at the processes by which they are getting their money from product providers, for example, if intermediaries are receiving incentives to place certain volumes of business with lenders.
The source said: “The FSA is interested in how brokers’ pay is generated, by which it will look at the advice they are giving and what processes they have in place to get these bonus payments.”
The source added that the FSA may release a Consultation Paper on this issue.
Robin-Gordon Walker, spokes-person at the FSA, said: “We’re doing a lot of work into the remunerations that general insurance advisers are given. And we are aware there is a potential for a conflict of interest in the mortgage market in terms of these bonuses and whether this may impact on the advice brokers give their clients.”
“To avoid this conflict of interest, we need to make sure firms are adhering to the rules and principles,” he added.
Mike Fitzgerald, sales director at Brentchase Financial Services, said: “If brokers are taking up these remuneration incentives but can prove that the lender in question was the right provider for the case, then fine. If they were way down the list, then you’re in trouble.”
“But brokers have written evidence on the ‘Reason Why’ letters for why the particular lender and product was chosen and all the product searching on the sourcing systems are time-stamped. So it’s pretty reasonable to think it would be hard for brokers to get away with anything untoward when it comes to extra bonuses they may receive,” he said.
