But, in reality, intermediaries are taking a more cynical view. Rather than see an appeasement to their costs, brokers feel this study is purely an exercise by the FSA to justify the costs of regulation.
With the regulator recently updating its website, announcing it will crack down on unauthorised brokers and having countless other projects and reviews in the pipeline, including consumer awareness of mortgage regulation, brokers fear these costs will also be placed on their shoulders.
Chris Cummings, director of the Association of Mortgage Intermediaries (AMI), said: “We believe this study will be more about justifying the costs rather than minimising them.
“The aim of the study is fundamentally to strip off all the costs and just look at the baseline – the bare minimum that brokers would have to pay – and see what this looks like.”
“It will then review whether it is detrimental to consumers to just charge the minimum costs. There are also the big costs to consider like the FSA’s Treating Customers Fairly (TCF) rules.
“Who know if the regulator will find that the costs aren’t justifiable? But this is the first time it has done a study like this, so it should be applauded for this,” Cummings added.
The FSA said its study, which will be conducted in partnership with the independent Financial Services Practitioner Panel (FSPP), will pay particular attention to the impact of costs on small firms and on wholesale firms operating in internationally competitive markets.
It explained its purpose will be to provide robust estimates of the costs to firms of regulation that stems from the Financial Services and Markets Act 2000 (FSMA) and will help to identify where there may be discretionary elements of regulation that are costly to firms but which are not matched by corresponding benefits.
It will also analyse the impact of regulation on firms' operating costs and how far these costs go over that which firms would spend anyway as part of day-to-day operation.
Finally, it will identify the extent to which FSMA regulation affects the prices that firms charge, the volumes, quality and variety of products or services that firms offer and firms’ ability to remain innovative and competitive.
Jonathan Bloomer, chairman of the FSPP, said: “The Practitioner Panel survey of regulated firms published in December 2004 established that the costs and burdens of compliance were the single biggest issue of industry concern and, in particular, to smaller firms. This research – its scope, direction and output – should provide a reliable and authoritative basis from which to identify areas where these pressures might be relieved.”
“It is a crucial piece of work. Our participation in its governance and ongoing oversight arrangements will help ensure that it is undertaken in a manner which practitioners would support and where the conclusions arrived at had the necessary credibility,” Bloomer commented.
Mike Fitzgerald, sales director at Brentchase Financial Services, welcomes the study but added that the costs of regulation must be reviewed in relation to the extra time brokers are having to dedicate to cases and compliance requirements.
“The biggest cost to brokers is the added time that things now take – whether it be sitting with the client or the extra paperwork that is now involved on the compliance side. We have some brokers who have now dropped out of doing general insurance simply because of the time involved in handling this business,” he said.
Fitzgerald added that he hoped the study would result in a lighter touch being applied to some products in terms of how much paperwork and checks need to be involved.
He said: “In particular, remortgages and building and contents insurance often involves reams and reams of paperwork when it is just not necessary. For the lender that has to sift through all of this as well, I’m sure they would welcome a review of this.”
Kevin Morgan, managing director of Consilium Financial Planning, believes the FSA is in for a rude awakening when it undergoes its study. “The FSA doesn’t really understand the huge impact that the regulatory costs have had on brokers.
“But whether or not it chooses to do anything about this remains to be seen. And exactly how much will it cost to do this study? Will these costs also come back to us? I’m not sure brokers would be able to appreciate the irony.”
