Early in February 2006 the FSA published the results of two surveys, both of which are of interest to mortgage and general insurance (GI) firms. The first is all about how effectively the FSA is communicating with small firms and it questioned 821 of them, including 162 mortgage advisers, 167 IFAs and 236 GI brokers.
Mortgage advisers rated the FSA’s communications the highest of all groups questioned, with 96 per cent saying they received the FSA’s e-mails and 90 per cent receiving its newsletters in the past three months. 89 per cent of those questioned visit the FSA’s website at least once a month and 97 per cent are aware of training provided by the FSA. General insurance brokers also showed a high level of communications awareness, although lower overall than their mortgage broker counterparts.
Receiving communications is one thing but the vital element is understanding what they mean. Here, the survey results show a different picture about how communications issued by the FSA are perceived. When asked to score the publications out of 10 as ‘easy to read and understand’, newsletters were scored 6.5 by mortgage brokers and 6 by GI brokers, while the FSA’s website scores 5.9 and 4.8 respectively. This clearly shows a gap that needs to be bridged, and the FSA says it is analysing how the survey results can inform its future communications strategy for smaller firms.
In the mortgage broking sector we are fortunate in having a lively and well-informed trade press, which perhaps has contributed to the fact that mortgage advisers scored highest when it came to accessing the FSA’s communications media. However, until that gap in understanding is bridged keep sending in your Questions from Hell amongst other things.
Briefly, the second survey (among 1,400 consumers in relationships) revealed how hard couples find it to talk sensibly about money. A quarter of couples argue regularly when they try to discuss their finances, a third lie to their partners about how much they spend on credit cards, and a third lie awake at night worrying about their money situation. The point of the survey seems to have been to direct the public to the FSA’s new website section, Money Laid Bare, which aims to give consumers basic information about how to control their finances better. For mortgage advisers there is also a moral: if people are so dishonest with their partners about money perhaps we need to probe a little deeper when finding out the customer’s circumstances prior to recommending a mortgage for them. Back to quality factfinds, record-keeping including the value of product confirmation/suitability letters again.
Mystery shopping – unfair?
Q1: Much publicity has been given recently to the FSA’s seeming passion for mystery shopping with which to hit the industry. This always seems to be a very unfair approach; wouldn’t the FSA be better off spending our fees on more staff to undertake visits?
Bill answers: The FSA does seem to use mystery shopping a great deal, although in practice this probably only represents a relatively small part of its budget but because of the press profile it takes on a much larger persona. As with all of our businesses, commercial reality is very important and no doubt the FSA can achieve much wider coverage of firms and issues by using mystery shopping. I would estimate that if the FSA increased its staff further to undertake visits as you suggest, they would need a large number and the incremental cost on our annual fees I think would be too high. Mystery shopping in the mortgage industry was around long before mortgage regulation and has become established as an effective tool for regulators. I guess it only really becomes unfair when you are caught out.
Funds and capital resources
Q2: Ours is a fairly small firm selling general insurance products and advising on standard mortgages with two partners and three registered advisers. We find it very difficult at times to work out what our regulatory funds and capital resources should be. Can you suggest an easy way to do this calculation?
Bill answers: The best place for help is actually the FSA itself. If you go to its website and go into the small firms section you will find they have created an e-learning facility costing only £30. that gives you exactly what you are looking for. There are a number of key elements including learning how to calculate your firm’s financial resources. From the description on the site it seems to be a very useful and practical way of helping us.
Practical T&C advice
Q3: Repeatedly we are told, especially by the regulator, how important it is for our staff and advisers to be competent, meeting all of the FSA’s training and competence (T&C) requirements. I have read the T&C rules in the FSA handbook but would like some more actual practical advice and guidance. What can you suggest?
Bill answers: One option would be to retain a high-quality compliance consultant who could work with you and your staff, the benefit which would be very practical and interactive. Alternatively, you might want to look at the FSA’s website especially the Small Firms Division. It is very aware of the needs of smaller firms it seems and has been very proactive in producing some very clear and helpful guidance. If you go to www.fsa.gov.uk/pages/doing/small_firms/mortgages/practices/tc.shtml this should give you what you are looking for along with other links to similar helpful sections.
