Broker Voice Opinion
The cost of broking The reality for smaller firms C
Peter Robinson Founder Kazlin Commercial Finance
told this will increase considerably from next year. Before I’ve even completed a deal or drawn a penny in salary my brokerage has cost £3,000. I will have to balance the cost of maintaining those permissions with the cost of not remaining on the panels of some lenders.
M
Y
CM
MY
T
he cost-of-living crisis is being felt by Britons from all walks of life. Although not unconnected, the cost of doing business is also rocketing, and there is a risk small brokerages will be priced out of the market. I have been a fully regulated commercial finance broker for 19 years and a qualified accountant for nearly 50 years, with an exemplary record throughout. So why then is maintaining a small brokerage harder now than ever before? Allow me to explain. In the early days, Consumer Credit Licences were granted to those who could demonstrate proven experience. It was at a cost of about £250 for a five or seven-year term and regulated by exception reporting from the public who could make complaints to the Office of Fair Trading. It was far easier to arrange commercial finance than it is today, it took less time, and all licence holders could cover the whole market as the priority was to service what businesses required. A minority of brokers were undoubtedly exceeding acceptable fee levels and there were cavalier lenders, but in my opinion the good brokers far outweighed the bad ones. From 2013, and with the FCA’s oversight, new permissions were granted to those who could again demonstrate proven experience. An initial lump sum was to be paid, in addition to the costs of legal advice and a recurring annual fee. My current fee is £820, and we have been 44 | NACFB
For brokers, complications have arisen through an increasing number of lenders who are now insisting that brokers must be regulated to not only complete regulated transactions but also unregulated transactions via limited companies. If all lenders adopt this stance of regulation by the back door there will be no place for unregulated brokers. They will be forced to either accept the high regulatory fees and apply to be regulated (currently £1,500 plus an annual fee), become Appointed Representatives of regulated firms, or forced to leave the industry altogether. In my opinion there remains a lack of regulatory clarity and much is left to interpretation. Most commercial mortgages are unregulated but if you are completing them for an individual, sole trader, or partnership of less than three, the broker must obtain permissions. The FCA’s blanket approach to our industry cannot continue, one size does not fit all, and some areas are better controlled than others. If businesses do not have the required funding they do not grow, and the economy does not grow but this meaningless regulation and compliance the FCA is churning out defeats the object and is harming the whole financial process. Ironically, those who the FCA is trying to protect currently may be disadvantaged by not receiving the benefit of a full market appraisal and ultimately pay a higher price for their commercial finance owing to higher regulatory costs. These are tough times for us all. I hope that changes and flexibility are introduced with calmer regulatory heads so that small brokerages like mine can continue to do what we do best, funding UK businesses.
CY
CMY
K
