The FSA has published a speech by Stephen Bland (Director, Small Firms Division, FSA) entitled The Retail Distribution Review and the impact on the mortgage industry. In his speech Mr Bland discusses the following points:
- Possible direct regulatory read-across of the Retail Distribution Review (RDR) to the mortgage market. Here he confirms the FSA’s position that the RDR aims to address the root causes of problems that persist in the distribution of retail investment products and that there is no automatic transfer to the mortgage market.
- Possible indirect consequences for the mortgage market. Here Mr Bland makes 3 points. Firstly, many firms give advice not just on investments but also on mortgages and protection. Nearly half of the directly FSA authorised mortgage brokers have the investment part of their firm affected by the RDR. Secondly, all types of firm may choose to use the ideas put forward in the RDR in order to see if they can make any commercial and efficiency gains. Thirdly, the mortgage market needs to operate with the outcomes of the RDR in mind. The RDR aims to achieve an investment market which gives consumers better outcomes in terms of the advice they receive and services available to them, with standards of professionalism that inspire confidence and clarity about the services being provided and what the customer is paying for.
- Whether the mortgage market may face similar issues to those covered by the RDR. Mr Bland notes that for the retail market the FSA’s aims are straightforward, to help consumers achieve a fair deal from a sustainable financial services industry and for them to have confidence in the products they buy and the advice they take. The FSA tackles these issues in a variety of ways, including its work to improve the public's understanding of financial matters, its TCF work, and through principles-based regulation. Certain aspects of the retail investment market and the way that products are designed and distributed make it difficult for the FSA to achieve its aims. The FSA wants to address these problems (which includes complex products and poor consumer understanding and engagement) through the RDR.
As regards the current market Mr Bland states that the FSA is close to concluding the second stage of its Mortgage Effectiveness Review. The FSA’s findings will be published in Q1 2008.
View FSA speech - The Retail Distribution Review and the impact on the mortgage industry, 30 November 2007