The FSA has shown it is listening, so brokers should accept the rules, says Michelle Hannen
Acquisitive brokers will be breathing a sigh of relief over the news this week that the FSA has given them a temporary reprieve on goodwill.
The decision to give brokers time to cycle goodwill off their balance sheets is a sensible and practical acknowledgement of the very nature of insurance broking businesses. With few fixed assets, brokers are primarily valued based on the size and quality of the business they write, and this value is carried as goodwill on the balance sheets of the acquisitors.
This decision will allow acquisitive brokers to take advantage of market consolidation and give them time to write down the value of the goodwill of those they buy, rather than either forcing them to take a one-off hit or count it as a liability. This would, incidentally, have seen many of the UK's largest independent brokers deemed technically insolvent.
The change of heart on goodwill, coupled with the FSA's recent revision of its proposal to classify all business with turnover of less than £1m as private clients, shows that the regulator is willing to listen and compromise.
It should dismiss, once and for all, the image of the FSA as combative and antagonistic, and dispel the apathy that exists in the broker market over the industry's ability to shape its regulatory regime.
The CP187 consultation paper on insurance selling and administration is still out for comment, consultation papers on regulatory reporting and conduct of business rules are still to come, and there is a push currently underway to see compulsory risk transfer statutorily enshrined.
So, brokers have two choices: speak up now or accept the regulation they are dealt without complaint.