The Bigger Issue


Regulatory change looms on the horizon but


your firm preparing for the Retail Distributio Each month Mortgage Introducer takes a look at the bigger issues. This m


The Financial Services Authority has been undertaking a thorough review of all the financial services markets in the UK and it has recently been intensely focused on addressing the way firms provide advice.


The Retail Distribution Review and Mortgage Market Review both place the spotlight on driving up standards across the industry and how we – as a service driven industry – can provide an improved service offering to consumers. Currently, individuals providing advice on pure protection policies are not subject to any particular exams as it is their firm which is responsible for ensuring competence within their training and competence schemes. The protection market is complex and with so many providers offering multiple options on their policies it is plain to see that the industry needs to set standards for advisers working in this field. The approved persons regime will soon extend to any individual giving advice on mortgages and this will bring a greater degree of accountability of advisers into the market, which must be seen as a positive change. There is, however, reason for caution. The financial markets


are extremely fragile at the moment and we have lost significant foreign investment over the last couple of years. To a certain extent, market recovery will be based on the regulator being fair as well as tough and we must be careful not to adopt a ‘one size fits all’ approach to products and services. The industry needs innovation and foreign banks need a reason to trade here, as both of these factors assist the UK in maintaining a competitive market.


In summary, we must accept that the UK (and indeed, the world) has experienced the worst financial crisis in decades and the ‘light touch’ regulation of previous years needs to be replaced by more intrusive and intensive regulation. We need change. The industry has an ongoing relationship with its regulator and its intrinsic message has always been clear and simple. Provide good advice in a professional and proficient manner. Let’s just hope that the regulator can get the balance right between allowing innovation and providing supervision.


Matthew


Fleming-Duffy, director,


Abacus Financial


The Retail Distribution Review will come in effect at the end of 2012 and a lot of work has already been done by the FSA and other interested bodies.


It is being implemented to raise professional standards and to stop adviser commission distorting the quality of the product sold.


I do fear that the RDR might include both mortgages and


protection sales in some way and there are ongoing discussions regarding this. I agree with the vast majority of the RDR and as a former financial adviser I did know that in some areas there was considerable commission bias in investment products. This commission was taken from the investment in charges and in many cases led to considerable customer detriment. However I cannot see how consumers being sold a mortgage or basic protection policy could benefit by the adviser charging a fee instead of receiving commission from the lender or provider. Most mortgages now pay a similar procuration fee and are sold on rate and other benefits. Life protection is also sold mainly on price and any meddling with this tried and tested method will only confuse the consumer.


If the FSA does include mortgages and protection products


in the review then consumers will be driven away from buying valuable and much needed protection. At a time when there is such a big shortfall in UK life insurance needs we do need to be careful not to push consumers away. If a protection adviser tells a client that he will charge her for taking out a basic life policy then there is a fair chance that the client will turn to a supermarket and buy a policy off the shelf, or not bother to buy any cover. The RDR has been fairly well accepted by IFAs and a recent


report by professional services firm Ernst & Young stated that over two thirds of those polled thought that the review would enhance advisers’ standing and could increase business. Compulsory exams and continuous training will enable IFAs to improve their business levels and earnings and help consumers to once again have faith in the UK financial services.


Mike Fitzgerald, sales director, Brentchase


Financial Services Our experts have had their say, now it’s your turn to have yours. Visit www.mortgageintroducer.com and vote for the expert you think makes most 16 MoRtgage intRoDuceR AUGUST 2010


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