We are living in an increasingly Orwellian society and in the mortgage world the Financial Services Authority (FSA) rules the roost. One little brother of this Big Brother-esq regulatory regime is the Retail Mediation Activities Return (RMAR), which collects information for the FSA as a basis for its supervision activities.
RMAR requires all mortgage and general insurance intermediaries and personal investment firms to fill in an extensive form twice a year reporting all their finacial data, conduct of business information, data used to calculate regulatory fees, product data and much more that leaves many mortgage intermediaries feeling more than a little confused.
It’s the rules
Danny Lovey from The Mortgage Practitioner, says the pressure placed on intermediaries to complete their RMAR is ‘unrealistic’. He says: “I’m expected to be a quasi-accountant as well as a mortgage adviser. It’s unrealistic and over the top to expect a sole trader to get their balance sheet ready within 30 days. First you have to work out what your balance sheet is and then present it exactly how the FSA requires. If I paid an accountant to do this it would cost a fortune, but as it stands I lose money anyway not being able to write business while I complete the RMAR.”
Lovey says he phoned the regulator no less than 50 times last year while trying to fill out his balance sheet and that on a large number of those phone calls, he was unable to retrieve the information he needed.
Sam Bennett, press officer at the FSA, insists the RMAR has been designed so firms can complete it on their own and she revealed that there were no plans to make fundamental changes, but confirmed the possibility of adjustments to the current practice. “We are working with firms to make RMAR easier to fill in. We have released some tips and advice, frequently asked questions that relate back to the question, and have produced activities such as an e-learning package.”
Lovey says balance sheets stop sole traders making money, grind them down and are unnecessary when sole traders have unlimited accountability anyway. Although he believes the FSA recognises sole traders have a big role to play in developing the market, an industry insider has suggested RMAR was in fact designed with the view that directly authorised (DA) advisers would eventually join networks.
Regulation on auto-pilot
Many intermediaries entered the profession partly for its personable attributes. It does, therefore, seem somewhat sad that their regulatory beacon feels it is not cost-effective to have personal arbitration. Bennett says: “RMAR was introduced when the FSA started supervising mortgage and general insurance firms. With 18,500 firms to supervise, there were not enough staff to continue to do it in a paper-based way.”
Kevin Moss, managing director of Financial Services Limited, comments: “We have serious reservations of RMAR as a way of regulating, as it throws the entire onus onto the adviser. It is not designed for brokers benefit, but for the FSA’s. To fill in the RMAR you have to use online help, but it is still very confusing and links often don’t work. We answered yes to one question when we should have said no and received disciplinary action, even though if it had checked its own records it would have shown that we’d answered the question incorrectly. It seems RMAR is interpreted on auto-pilot – there doesn’t seem to be any human involvement at all.”
However, not all aspects of the RMAR electronic reporting are under such scrutiny. Lovey says: “ I’m not happy about the balance sheet aspects but for checks like how many staff you have, how many DAs, how much income your firm has, it makes sense to do it electronically.”
Moss adds: “RMAR has onerous implications. Before mortgage regulation we still had to write an annual return. A lot of information was still required, but we could meet with an auditor and make sense of what was needed. RMAR is a sophisticated validation system – if there is a discrepancy in the data it will show an error until it is exactly right. The time costs alone are unbelievable.”
However, not all aspects of the RMAR electronic reporting are under such scrutiny. Lovey says: “ I’m not happy about the balance sheet aspects but for checks like how many staff you have, how many DAs, how much income your firm has, it makes sense to do it electronically.”
Uprisings
Paul Thompson, chief executive at the Swansure Group, says the twice annual reports allow the regulator to check up on industry standards. “RMAR is a way of spotting if brokers are ‘Treating Customers Fairly’ (TCF), and that they have a satisfactory sales process. For example, if 20 out of 100 claims are declined, it could be deduced that customers aren’t being told about pre-existing conditions and eligability criteria and that those intermediaries might need to re-visit their sales processes.”
Although RMAR has received a lot of bad press it is still an important report in the eyes of the FSA. So far, it has barred 25 small firms from conducting regulated business for failing to complete their RMAR, so warnings must be heeded.
