Sally Laker looks at the future for appointed representatives (ARs) and directly authorised brokers post-regulation
Appointed representatives (ARs) who have properly considered their options and done the necessary research and background checks should be pleased with the overall package they have taken on. But sadly, I feel that many brokers may have rushed to join a network. They chose the AR route because it was cheap or free and required little or no paperwork to complete, or simply because the network asked few questions.
Ultimately, that could prove costly because it was a key decision that will affect the day-to-day business on an ongoing basis. From 31 October broker’s needs will be enormously different under FSA ruling rather than MCCB, and every broker must be fully aware of his responsibilities, whether he is directly authorised (DA) or an AR.
Regulatory input
The network will take responsibility for it’s ARs. But even so, as the primary owner of the business a broker needs to understand exactly the impact of regulation on their business. To a certain extent ARs will be guided through all that is required and helped by an active compliance team on the road. Providing there is always someone at the end of the helpline that can offer sensible and factually correct information that will ensure that being part of a network is worth the money. Any shortfalls in service, compliance, IT support, and lets not forget exclusive mortgage deals and muscle when needed - could lead them to question what they are getting for their money.
‘Renetworking’
So in six months time, don’t be surprised if switching your network becomes more popular than switching your mortgage. Perhaps ‘renetworking’ will become a new word in our vocabularies and as well used as remortgaging over time.
Sadly, renetworking it is not likely to be hassle free. For example, in the small print you could find you will lose your pipeline and renewal commissions, and in some cases your clients. For those that did not have time to check the contract thoroughly and did not question ambiguous phrases, check it now. The longer you leave it the more expensive a wrong choice could be.
Show your knowledge
DAs who have decided to go it alone will have had to ensure that they have met all the requirements set out in MCOB. So the information in MCOB must be fully absorbed as it is unlikely that the FSA will consider ignorance of the rules as an acceptable excuse for not complying. The information is out there for all to see and in applying to be DA they have confirmed that all these new procedures are in place.
For any DA that does not have any such processes in place, I would recommend tapping into the support services of a network now. It takes time to create a workable training and competence (T&C) scheme and the monitoring that goes with it. Without an audit to check that you are now FSA compliant, are you really sure that you have everything in place?
Again, in six months time, apart from the dissatisfied customers switching, we will see DA’s switching to AR status and vice versa. I have to say it is easier to switch within a network as at least the IT system would be the same and the T&C and BDMs would be familiar.
Choose wisely
There is yet another decision to make if you have joined a network that only offers one route, who do you switch to? Brokers must choose wisely given the importance of compliance and the likelihood of significant network consolidation. But one thing’s for sure, the voluntary code is over, there are specific rules to comply with and the penalty can be harsh if you flaunt it. The FSA have given almost two years for everyone to get ready and will show no mercy for those that have chosen to ignore regulation.
For brokers that have decided to ‘take a chance’ they are walking on dangerous ground. Not only will no network risk taking business from a non-authorised broker for regulated business, neither will any lender as no one will want to aid someone committing a criminal offence.
Lenders have also had to cope with a great deal of change in preparation for regulation. This has been made more difficult by the fact that each lender has adopted a different process on how they should be accessed. This procedure may involve re-registering, will differ from lender to lender and will present further challenges for brokers and the networks with large panels.
There will be teething problems and I do not anticipate a pain free transition period. Networks and lenders will have to react first to new information and potential system changes and brokers will need to be sure that they keep their ears to the ground. So the only certainty for the new post-regulatory world will be casualties and there will be expensive mistakes. The good news is that for most there will be help and support from stable networks, offering solutions to ensure that brokers are able to sleep at night as well as run a compliant business.
Sally Laker is managing director of Mortgage Intelligence
