Sarah Wilson explains to Michael Faulkner why brokers need to act now
The publication of the FSA's final rules is imminent. They will set out the regime that brokers will need to adhere to in 2005. …
Sarah Wilson explains to Michael Faulkner why brokers need to act nowThe publication of the FSA's final rules is imminent. They will set out the regime that brokers will need to adhere to in 2005. The picture will be almost complete; only a few issues, such as the Financial Ombudsman Service and the Financial Services Compen-sation Scheme, will remain. The message from the FSA is that brokers need to act now."2004 is a major year for the industry," says Sarah Wilson, director of the high street firms division of the FSA. "There is a lot to do and there is time to do it, but people need to act in the early part of the year to ensure that they have time to do everything." Wilson says that firms need to move away from thinking about regulation as an issue that is only important to compliance officers. The impact of regulation must be thought of in wider terms. Brokers must see it as a strategic issue. "Regulation cannot be pigeon-holed and parked with the compliance division. Firms need to think about regulation in a commercial way, such as how it impacts on senior management and distribution channels. "Regulation will increasingly affect the way that senior management think commercially. Senior management has to think the commercial and strategic issues through. The FSA will not come up with answers." Wilson highlights the issue of secondary intermediaries as a case in point. This section of the distribution chain does not appear to appreciate the impact that regulation will have on it, and is not registering with the FSA in the numbers expected. Brokers and insurers need to ensure that their secondary intermediaries are authorised by January 2005. If not then an important part of their distribution chain will be wiped out. "The secondary market is not showing signs of understanding and engaging with the process [of authorisation]," says Wilson. "We are not seeing the volumes of registrations coming through from this part of the market. "It is very important for the industry to engage with the secondary market - and to think about this now. Insurers and primary brokers are dependent on the transaction with the customer, and this takes place on the high street, often through the secondary market.
Major issue"The industry needs to make sure that it thinks about the impact of regulation right the way through the chain. Insurers and brokers have a part to play in getting the message through to the secondary market. It matters to them commercially. The primary part is only ok so far as they have customers at the end of the chain. They must participate as an industry to get this message through. It is a major issue for the insurance industry." Seven thousand mortgage and general insurance firms - both primary and secondary intermediaries - have registered with the FSA. This is a long way off the regulator's target number of 20,000 firms. Does this bother Wilson?While she is concerned about the number of secondary intermediaries who have registered, she is pleased with the response from brokers. "The primary market is showing signs of registering in good numbers. We are pleased with the level of engagement so far. "There is time for more to register. The general insurance industry hasn't got its final rules yet. Firms might use that as the trigger to register. But firms do need to act."The question on the mind of many brokers will be how soon to complete their applications. Is it better to apply as early as possible, or to wait until the firm is further down the road to compliance?"Firms need to ensure that they can sign the declaration saying that they can be compliant by 14 Jan 2005. They need to have laid some plans - we are not talking about micro detail, but plausible plans we can look at," says Wilson. "I don't think it is necessary, or an advantage, to be compliant before submitting an application. But firms will be judged on the basis of the confidence we have that they will be compliant. If it appears that firms have done more to achieve compliance then we will have more confidence. "However, firms should not delay in applying. They should get themselves in a position where they can explain why they believe they will be compliant in 2005 and get the application in."