four years. They will see some people face to face and some they won’t see. Based on the outcome of those they’ll decide whether they need to do anything else. A lot of that is based off the mortgage intelligence they’re getting and in the same way, when you look at a firm it depends on what you find. If it’s pristine then you tick the box and move on. If this person is doing a lot of equity release and high loan to value lending then you take a look. DC: Every equity release file, we’ll look at. Run of the mill residential loans we’ll be less likely to look at. There are a lot of things now. There’s lending into retirement and interest-only etc. Anybody supervising will look at all of those because they are being deemed as high risk mortgages. PB: Scale is important to lenders because perhaps scale is related to financial security, investment systems, technology and everything else that’s required but I think they’re looking at business quality in a very big way at the moment. The cost of processing those applications is a major feature now. Just because you’re big doesn’t mean you can control that, if anything you could argue the challenge is greater. At the moment the bigger networks are having the challenge of keeping the boxes ticked on scale. DC: There’s also a difference between an AR and a registered introducer. They tend to be employees working under those systems of controls whereas an AR is a self-employed business person running their own company so you have less type of control over those types of people. PB: In our respect we’re slightly different because we have our own brokers who we have ultimate control over, whether they’re employed or self-employed, they are directly controlled by us or for
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our AR partners we handle all of their compliance and handle it in exactly the same way. What we don’t do is supervise their compliance, we actually handle their compliance.
IF LIMITED FUNDING AND FRAUD ARE BEHIND LIMITED DISTRIBUTION IS IT EVER LIKELY TO REVERSE AND OPEN BACK UP TO ALL ADVISERS? NS: If the UK starts growing and capital becomes easier to get it will undoubtedly reverse to some extent. I still think that tranche managing and some restrictions are becoming so in- built that it may not completely reverse back.
ARE LENDERS COMING IN AND SAYING THEY WANT TO KNOW ABOUT YOUR DAS AND THEIR COMPLIANCE AND WHO’S RESPONSIBLE FOR THEM? DC: Well they’re not our DAs. DAs are by their nature nobody’s. They tend to come to us for mortgage products and procuration fee. We need to know what the lenders want us to collect for them. Can that be generic and will the FSA be happy that a third party is doing a due diligence? RS: Their view on this is always that under distributor rules is that if you delegate then all responsibility still sits with you. The lenders will have to satisfy themselves that the third parties are doing enough. Ultimately the FSA will ask how are you doing this and show us that you do it. DC: We had the same questions asked. We check our advisers’ accounts and credit check them every year. At the end of the day I don’t think there will be a standard. If you’re a lender, it’s a lot
easier to go to 20 larger firms who write a lot of business in the mortgage market and get that information as opposed to get the information on 5,000 DAs out there. There just isn’t the manpower to do it.
WE TALKED A LOT ABOUT ARS AND NETWORKS BEING A SAFE HAVEN AND DAS BEING DISPERSED AND HARDER TO TRACK. RS: Not all DAs. Look at London & Country, a very tightly controlled telephone-only firm. They are the exception not the rule but there are some like that. DC: I don’t think we’re saying that DA business lacks quality. Some lenders will talk to us about the performance of the DA book and the AR book and there’s very little difference. It’s a question of knowing your broker and managing that which is causing issue in that market. RS: The one or two-man DAs that are sitting within IFAs tend to be good firms writing quality business.If this is about lenders working out whether they’ve got system controls over the quality of the business being submitted to them, that’s one issue. If we’re talking about the issue of a lender only having x million to lend and therefore they’re going to reduce who they’re going to lend through, then that’s a different issue. They could use quality as an excuse or proxy for that or they can provide
MORTGAGE INTRODUCER APRIL 2012 37
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