The one resource that no broker can get enough of in today’s marketplace is time. This is particularly the case for the thousands of smaller firms that make up the majority of the UK’s mortgage intermediary market. While the larger firms are able to expand and employ substantial compliance, marketing, and sales departments, the smaller firm has one or maybe two people covering all bases and therefore it has to use its resource wisely. One person can only do so many tasks in any given day and therefore time management is a skill that all small firms must master if they are to survive in our highly regulated market.
This thought came to me while reading about the Financial Services Authority’s (FSA) presentations at the recent Mortgage Business Expo in Manchester. Firstly, I am pleased to see the FSA in attendance at such shows. It is vitally important that our one and two-man bands get the opportunity to listen and speak with the regulator at events like these. They do not have the luxury of being relationship-managed and most of their interaction with the regulator would be through the Firms Contact Centre. It is absolutely vital that smaller firms are able to see the whites of the regulator’s eyes because it is only through this type of feedback and interaction that the FSA will truly begin to understand the time and resource pressures these firms are under.
Relationship
From the sound of the reports coming out of Manchester, the FSA was there in force and delivering findings from its work in the first part of 2007 and outlining the areas it will cover in the second half of the year. At one of the seminars, an interesting comment was made by Mandy Spink, head of mortgage and credit unions at the FSA, and is perhaps indicative of the relationship between smaller firms and the regulator.
Talking about the reviews and thematic work that the FSA has carried out, and the publication of findings in these areas, Spink said that the very minimum it expected of firms was to read these findings. As a statement this seems obvious – indeed, I would expect the regulator to expect much more of firms than simply reading the findings of its reports.
Perhaps, one might suggest that the regulator is having to rebuild its relationships with small firms in particular. Simply reading the findings sounds like the first step in any ongoing relationship, not something that should need to be said over two and a half years under a statutory regulator. Is the FSA suggesting that firms have not made the time to even read its thematic work findings over the last couple of years? One wonders if this is a case of small firms wanting to engage, but not having the time to do so, or is it more a communication issue between the regulator and the regulated? Then again, some firms may have simply chosen to ignore the fact that the FSA regulates them. Not a wise decision.
A risk-based approach
There is much talk of the moment about ‘engagement’ – this follows FSA reviews where the results have suggested that smaller firms in particular are not engaging with the regulator on these issues. Spink said that firms should look at the results of the various thematic work projects and ‘consider if these have any implications for your business’.
The FSA continues to use a risk-based approach to regulating mortgage intermediary firms. This has meant it has built supervisory relationships with the larger firms as it believes failings in these firms would cause greater consumer detriment because of the larger numbers of customers they deal with.
It has been put forward by some commentators that an ‘unforeseen circumstance’ of this medium and large firm focus has been that the smaller intermediary firms have acted as if they are untouchable. To coin a phrase, they have determined that they are ‘under the regulatory radar’ which is why the FSA’s recent quality of advice and ‘Treating Customers Fairly’ (TCF) reviews have shown small firms to be further behind than other regulated companies.
The regulator itself does not buy this argument, even if smaller firms continue to suggest that they find the regulator aloof and difficult to communicate with. A week after Expo, the FSA’s director of small firms, Stephen Bland, gave a speech in which he made it clear that the FSA considers no firm to be under its ‘radar’ and warned those firms that are not complying with the rules that they could face a regulatory visit at any time.
This is an important point and one all firms should consider – the suggestion is that the FSA will catch up with you eventually and with all the work currently being carried out I have heard that there is a one in three chance of a firm being visited.
Firms who have difficulty getting to grips with the vast amount of regulatory information that needs digesting have a number of options. Firstly, the FSA website does have plenty of examples of good and bad practice, and there is always the option of joining the Association of Mortgage Intermediaries which breaks down the regulator’s output into bite-sized, practical chunks.
Reading the FSA’s findings should be the start of your engagement; to ensure you meet your regulatory responsibilities you should attempt to use some of your precious time to engage with the FSA’s ongoing communications. Failure to do this could mean you eventually have plenty of time on your hands.
