There are plenty of signs of what the FSA is planning after regulation D-day, so brokers should take note, says Stuart Reid
Much is being made of the implications of the FSA rules for January next year. Much is being made of what the rules mean and much is being made of what still remains unclear. Nothing much however is being discussed about what might happen post 15 January.
I am sure that many will say that it is far too early to discuss any issues beyond implementation (and that they haven't the energy) but planning any business has to take a short, medium and long-term view.
You may have noticed that the Financial Times report on the disclosure of fees and commissions for banks, building societies and IFAs. The changes have been brought about by the FSA. Is it inevitable that this is going to happen in the broking market? The argument has been won in the first round, but surely this was simply a stay of execution.
An article in Insurance Times also gives serious food for thought. It reported that an Irish inquiry by the Competition Authority (CA) into the general insurance market there has recommended that consumers ask brokers for commission details. Nothing new here. It has, however, also advocated the introduction of a transparent fee-based system.
More worrying is that the CA, while advocating disclosure in Ireland, mentioned that commission rates enjoyed in the Republic were significantly less than those enjoyed by brokers in the UK. It is believed that the CA could look to pressure the EU to impose this regime in all member countries.
I, for one, am not a fan of this transparency - no surprises there. When you generally buy commodities or services you don't ask the assistant how much the seller earns. Yes, IFA commissions are transparent, but they sell long-term policies and can get significant commission up front. Not the same in general is it? Well, not for some anyway.
Nationals are proud of their fee structures and will probably be best suited to any transparency. What of the general jobbing broker? With costs of IT and compliance already having an effect on profitability will a transparent fee structure mean margins are further squeezed ? It's inevitable.
If that is the case brokers must have at least an idea what further rule changes post January 2005 might have on their businesses. A consideration of the medium and long term view is surely prudent - remember the rulebook so far issued is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.
Stuart Reid is joint-managing director of Stuart Alexander