small advisors beware!

Only last week, an ex colleague approached me for advice. A relative who runs a small Directly Authorised firm had been given thirty days by the FSA to stop trading, hire a Compliance Director, or find a home as an Appointed Representative of a network. Without being privy to the facts of this particular case, it is my guess that he is not alone. You might not like it but you could understand if the FSA privately regards small DA’s as inconvenient and costly to regulate. This poses the bigger question, why would you want to be Directly Authorised in the current mortgage market?

When mortgage regulation arrived almost ten years ago, many suggested up to 20% of a DA’s time would be redirected into regulated matters, at a substantial loss of turnover, and the time to process any sale would increase owing to paper work. That is a stretch for any small business. Throw in subsequent initiatives from regulators, networks and lenders alike (TCF,MMR,RDR, I could go on)and you can quickly see how being a small DA might feel like running through treacle.

As a result of more sophisticated means of monitoring, many DA’s, who may once have considered themselves too small to bother the FSA, now enjoy even greater vigilance and policing from the regulator. Lost time, increasing regulatory fees, and falling mortgage and insurance income will present small DA’s with a strategic decision. My advice is to make the choice before it is forced upon you.