Michael Faulkner asks four brokers to summarise what impact the introduction of regulation has had on their businesses

CARL WOODROFFE, DIRECTOR, MCIS, BASED IN BIRMINGHAM

What have been the biggest challenges facing your firm in becoming FSA-compliant?

Understanding the legislation and translating it into practical applications within our business practices. Also, there is the need to formalise training and competence programmes.

How have you had to change your business practices?

Practices have not changed too much, but it has certainly become necessary for more documentation to be sent to clients and prospects.

Do you think FSA regulation will be beneficial?

Benefits to brokers will be better-trained staff, reduced susceptibility to professional negligence claims, and unification of data systems. The industry will benefit from a reduction in rogue traders and sharp practices.

Will FSA regulation make doing business easier?

In some areas, for example, it is likely there will be fewer errors.

In other areas, no. For instance, there is likely to be more client queries and the need to give more detailed explanations.

Do you think statutory regulation is necessary?

It was probably the only way to attain the desired result due to differences in opinion and competition. It is important to ensure client money is protected and that brokers have the necessary capital requirements.

Did the FSA handle the build-up to regulation well?

Generally, yes, though I was surprised that it allowed some firms to delay submission of applications.

Are you optimistic that that the FSA will be a good regulator?

Probably, yes, but it needs to focus on serious issues and not penalise those firms that have embraced the legislation and are striving to comply.

DUNCAN MACBETH, DIRECTOR, MACBETH SCOTT & CO, BASED IN CUMBRIA

What have been the biggest challenges facing your firm in becoming FSA-compliant?

Interpreting what the FSA was actually driving at, absorbing the governing rules and putting them all into practice took a long time.

A great deal of time was also spent ensuring that all documentation was in place, as well as acclimatising to the necessary staff training.

How have you had to change your business practices?

Staff had to be made aware of demands and needs statements, revised terms of business and the fact that they are going to be assessed and monitored.

Do you think FSA regulation will be beneficial?

The major downside is that everything now takes two or even three times longer to put into effect. This happens to the degree that I feel that some policies are simply not worth writing, as I would never be able to recoup the costs.

Will FSA regulation make doing business easier?

Certainly not. Doing business has now become a very time-consuming task, and it is debatable whether we will ever recoup some of the ongoing costs.

Do you think statutory regulation is necessary?

I totally agree that some form of statutory regulation is needed. What was wrong with the old IBRC? The FSA is supposed to benefit the retail or the personal customer, but I can't see how that can be as, in the main, all a retail client wants to know is the cost.

Will the FSA will be a good regulator?

Who knows? If the FSA will listen and learn, and then implement more useful rules, so much the better.

Frankly, I don't think it has a real grasp of the broking industry.

DAVID PENTLETON, HR & COMPLIANCE DIRECTOR, GILES INSURANCE BASED IN SCOTLAND

What have been the biggest challenges facing your firm in embracing FSA regulation?

We were using a large number of software systems for commercial insurance, and from a business and regulatory point of view we decided this was inappropriate. Therefore, a major challenge was to complete the initial installation phase of Acturis for all our commercial users before 14 January. This has now been done.

How have you had to change your business practices?

Most of our current business practices were either in place or being developed from a business need perspective before 14 January. There is more emphasis on risk management than before. On the operational side we collect more data and issue more paper, and we need to ensure that we get the balance right.

Do you think FSA regulation will be beneficial?

Did regulation (IBRC, FIMBRA, PIA, FSA) benefit IFAs and the financial services industry? However, past performance is not necessarily indicative of the future.

As not everyone has registered for authorisation, the competition has been reduced, plus barriers to entry have been created. And I'm sure that Giles can benefit from Marsh's recent decision to ditch unprofitable clients.

Will FSA regulation make doing business easier?

No.

Are you optimistic that that the FSA will be a good regulator?

Much depends upon how this initial period is handled, but there are encouraging signs. The FSA was not stampeded into making changes following Spitzer's case against Marsh and has retained a UK focus, which is important moving forward.

STUART REID, CHIEF EXECUTIVE, STUART ALEXANDER BASED IN LONDON

What have been the biggest challenges facing your firm in becoming FSA-compliant?

Identifying what all the compliance issues are for our business - how to comply and how it may affect our clients. Additionally, the completion of an application that would be acceptable to the FSA in the first instance, sorting out client money rules, ensuring that staff understand their roles, the writing of compliance procedures, and terms of business agreements.

We also set up an appointed representative (AR) network and therefore have to ensure that manuals are issued and training carried out in the proper manner, and that the ARs understand exactly what they can and cannot do.

How have you had to change your business practices?

Some have certainly changed for the better. We have had to make improvements in the way we record things, for example training and the recruitment and induction process. Inevitably ICOB forces a more disciplined approach to handling new business and renewals and there are new forms to complete.

Do you think FSA regulation will be beneficial?

There will be benefits but currently it is debatable as to whether these will balance out the disadvantages. FSA regulation will inevitably cost customers - currently suggested at £3 per policy.

Additionally I believe there will be a reduction in the number of small brokers following these changes, providing less choice for the customer, which is exactly the opposite of what was planned. It has not happened yet, but let's see.

Will FSA regulation make doing business easier?

No, far from it. I don't believe it will improve business transactions with either customers or insurers (let's remember that no one has asked a client what he wants from a regulatory regime). There are more processes to go through and more matters to consider. Also a huge amount more paperwork.

Did the FSA handle the build-up to regulation well?

Given the timescales that it had to implement the IMD, it has done a pretty good job. Consultation was good and it was happy to talk about issues directly with us. The extension of the deadline was a big shock and may cause some problems.

Secondary intermediaries still give cause for concern and the FSA will need to watch this area of the market very closely.

Will the FSA will be a good regulator?

I really do hope so. Fundamentally the FSA need to understand that the general insurance market is split into three camps - provincial brokers, national brokers and the Lloyd's/London market.

As long as it can appreciate the very specific differences between these areas of business then hopefully all will go well.

The real key is to weed out those that flagrantly breach the regulations and to help those who make the effort to be compliant. If it gets that balance right then I would count it as a success.

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