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partnership with a large firm who has access to those products. RS: I see the Bankhalls, the SimplyBizs and the 360s as the bigger winners perhaps in this process. These are clubs that offer compliance services to members giving lenders reassurance on quality. No big firm is going to bring someone in under that loose umbrella structure unless they have decent client support which gives them comfort.
IS THIS BEING DRIVEN BY LENDERS OR THE FSA? NS: The FSA just regulates who is in the market. So if there is any driving being done then it is probably lender driven. That said the FSA has indicated in the past that – like the insurance market – it would prefer to deal with a few well capitalised and well run distribution companies but that is probably in consumer interest.
LENDERS ARE LIMITING THEIR DISTRIBUTION TO LARGER NETWORKS BECAUSE OF VOLUME BUT ALSO BECAUSE OF QUALITY OF BUSINESS. NETWORKS SAY THEY DELIVER QUALITY BUSINESS BECAUSE THEY HAVE CLOSED DISTRIBUTION – WHAT DOES THIS MEAN IN PRACTICE? PB: To me there are only two types of distribution through a network which is appointed representative and DA. AR is technically more controlled distribution so is that closed?
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DC: I think the term is used for that. It’s an AR which you are in control of and you’re also in control of the panel as well. Most networks will have a panel and that tends to be a closed distribution as opposed to open and going to direct deals. PB: Exactly. You can’t just pick and choose which channel you use for whatever deal you do. There are GI providers, life providers and mortgage providers. RS: I’m not sure the term closed distribution means very much. It depends which end of the telescope you’re looking from. It’s how DA is split which controls everything else, how you control who sits in front of customers. Lord Turner got caught at the Treasury Select Committee on the Mortgage Market Review about this. Last year they did a large piece on mortgage fraud where they kicked the lenders all around the room so now lenders are starting to take action on it. That’s what is changing the face of distribution as well as the MMR. They’re being told very clearly to get to know who they are doing business with. DC: We’re getting asked lots of questions about our recruitment process, our monitoring process and we were never asked about these sorts of things before. If you let in lots of individual DA firms out there, it’s a lot more difficult for the lenders to glean that information. That’s part
in parcel about why we’re starting to see networks getting the better more exclusive products. At the moment the mortgage clubs are looking at those and asking themselves what they could do to satisfy what the lenders or the FSA. How are lenders going to find out about those 5,000 or so DAs?
DO YOU THINK LARGER NETWORKS HAVE THE MANPOWER TO GO AND VISIT ALL THEIR ARS AND MONITOR BUSINESS IN THAT WAY? LK: I think it must be tough for the likes of the bigger networks to go out and see every AR because the broker’s role has become a lot more remote. A lot are working from home and are they getting visits from networks? DC: It’s not only visits. We do a round of seminars which are compulsory so they come to us as well. We’ll do a compliance piece on the procedures and tighter controls we’re putting through. You start to look at the number of field compliance staff out there compared to the number of business writers and it’s around one in 75 to maybe one in 20. RS: It’s also about space monitoring and how you risk assess. Taking this up a level now, FSA supervision and their new financial conduct approach means they will deliver every broker into some form of seminar process over the next
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