It never gets cheaper for mortgage brokers to do business and many must be cursing the costs that regulation has brought to their operations.
There has been endless quibbling over the true cost of regulation and certainly there are many publicly aired opinions that the Financial Services Authority’s (FSA) figures are well short of the mark.
The regulator has claimed that the total one-off cost of mortgage regulation was just shy of £140m and that there would be ongoing annual costs of almost £70m under its stewardship.
How accurate these figures are remains a matter of conjecture, but what is clear to everyone is that substantial expense has been incurred.
There are a variety of areas in which regulation has generated costs for intermediaries including the documentation they have to give clients, the accounting and reporting they must undertake and the sales processes they have to adopt.
None of these offer any prospect of generating a return for businesses and are simply costs that must be absorbed and added to the bottom line.
The training and competence requirements have also generated costs for firms to bear, although they do have the potential to pay their way.
However, for training and educational bodies one of the biggest challenges in the corporate world has been trying to establish a direct return on investment that firms see from putting staff through training. How much better do they sell? Do they generate more new business and if so how much?
How much more effectively do well-trained employees work and how does this affect sales and processing volumes? These questions are certainly valid, but unfortunately quantifying the bottom line returns from staff training remains incredibly difficult.
More than just a piece of paper
Indeed some firms have even attacked training and qualification providers in the mortgage market, suggesting they are taking advantage of the regulatory regime to introduce exams and courses that are not necessary.
To answer such criticisms, one simply needs to look at the cost of developing course syllabuses, study materials and examination papers to understand that creating such qualifications is only viable if there is a reasonable take-up from the market.
In turn, this will only happen if there is a genuine need for the examination and more often than not it is that need which drives the creation of new courses and qualifications.
But for those paying for the training, what returns are there over and above the piece of paper they receive certifying their achievement? Although training requirements are relatively new to the mortgage market, ongoing development is something the best firms have always offered staff.
Not because they are doing so well that they can afford the extra cost it entails, but because they recognise that such training attracts the best recruits, creates the most effective team and sows the most fertile seeds for home grown future management.
Better qualified staff are able to do their job to a higher standard, engender greater amounts of client confidence than the adviser who simply muddles through and generate fewer complaints.
The Financial Ombudsman Service (FOS) will adjudicate on two complaints without making a charge but thereafter each will cost £550 whether they are upheld or not. Mortgage firms have a history of not having to field many complaints and good training is one way to ensure this remains the case.
Despite the problems with producing a direct return on the investments made on training, it is difficult to believe that it does not improve the technical and practical skills used by advisers on a day-to-day basis and does not make them more effective in their professional capacity.
Costs
But what of the costs involved in training? Each module offered by the Institute of Financial Services (ifs) is priced at £120. Given that the Certificate in Mortgage Advice and Practice (CeMAP) exam requires three modules to be taken that equates to a total of £360.
Given that the average mortgage in the UK is around £140,000 and taking a procuration fee of 0.3 per cent then each case completed by a broker will generate £420.
Clearly this is not straight profit as any broker will have running costs and overheads to deduct, but it does give a good idea of the sums involved and how they relate to the business being conducted.
For brokers looking to take the Advanced CeMAP, they will again need to take three modules and so the calculations and considerations involved are the same.
Most of the modules equate to anything between 40 and 60 study hours and so in return for the £120, the amount of technical information and learning involved in each is not insubstantial.
In taking such exams advisers can also broaden the scope of their expertise and so provide advice to more clients. Developing these new lines of business will take time, but without taking the requisite exams they remain off limits.
As mortgage intermediaries trawl the market for their clients so should they seek out the best deals on training and register for the courses and qualifications that will best suit the needs of their staff. ifs, for example, recently announced a partnership deal with Just Retirement, which sees the intermediary funding almost 40 per cent of the module cost for intermediaries to take the Certificate in Lifetime Mortgages (CeLM).
Taking advantage of such offers will see firms be able to get maximum benefit for minimum spend and such deals will be music to the ears of financial directors across the mortgage market.
The cost of doing business may not be getting any cheaper, but by introducing effective training the market can compensate by getting better at what it does.
