Mortgage Intermediaries - are you ready?

Over the last 12 months, there has been a great deal of discussion about the many regulations that are making an impact on the way in which mortgage brokers and IFAs operate and manage their records. There are several that affect those operating in the industry, most notably the Financial Services and Markets Act 2000, The Data Protection Act, The Companies Act 1985 and 1989 and The Freedom of Information Act 2000.

From 31 st October all IFAs and Mortgage brokers have to be registered with the FSA. Apart from the actual task of registering, which is relatively straightforward, all these members will be expected to comply not only with the ethos, but also the specifics of the internal procedures laid down by the FSA for handling documents going forward. These procedures have been documented and published in the recent FSA's Policy and Standards on Records Management. But will these companies, many of whom are only a few people strong, be able to adhere to the recommended modus operandi laid down by the FSA?

Our opinion is yes, but it will be difficult without a change in their strategy for document management.

So, what does the FSA recommend? The headline is that all documents relating to the sale of a mortgage must be kept for at least 3 years. That is the bare minimum and FSA compliance officers are already advising that they should be kept ad infinitum. In the life and investments market, which the FSA has regulated for many years, history shows that complaints can occur many years after the sale and if the advisor has no record of the original transaction, then they have no solid ground from which to def end themselves.

It is equally crucial that the industry does not just focus on mortgage sales agreements and the related documents and correspondence. If the business is taking information management seriously, it needs to target other critical data, such as email messages, diary records, reports, plans and in some cases, audio and video tapes.

So, how can a company store and handle these records? IFAs traditionally create a plethora of hard copies for each policy and any documentation relating to it. Storing these could potentially take up a considerable amount of office space. Let us again look at the FSA guidelines. The regulatory body recommends that records should ensure that "storage conditions and handling processes should be designed to protect records from unauthorised access, loss or destruction and from theft and disaster." It also states that: "Records should be stored on media that ensure their usability, reliability, authenticity and preservation for as long as they are needed. Issues relating to the maintenance, handling and storage of records arise throughout their existence, not only when they become inactive." It is clear that rows and rows of filing cabinets will no longer suffice.

Who is allowed access to records is another issue where each company needs to develop a set of guidelines, with the specific circumstances that allow access laid down. An audit trail is crucial, enabling the system to track down the record wherever it is at any given moment.

So, how can mortgage intermediaries equip themselves with the right tools at an acceptable cost to the business to be able to rest easily in the knowledge they comply with at least the minimum FSA requirements?

Back to the FSA: "Systems for electronic records should be designed so that records are accessible, reliable and useable through any kind of system change, for as long as they are kept."

But, it is not just about IFAs and mortgage brokers becoming compliant with the regulations that are foisted upon them. An efficient electronic document management system is a way of making sure that the business is storing and protecting critical information and knowledge that make up the intangible assets of the company. Records must be kept for as long as required to meet current and future business needs and to reasonably meet the needs (current and future) of internal and external stakeholders.

It will also allow IFAs and mortgage brokers to offer better customer service. With the correct system in place, advisors will be able to locate documents using an online document management system when customer queries occur, instead of having to call customers back when administration staff have tracked down the correct documents.

One of the leading IFAs in the UK, Millfield Partnerships, has over 2,000 advisors and thousands of clients. The company kept so many physical copies of critical documents relating to the advice they have given to their clients, that the filing cabinets took up over 40% of the office space. It is clear that this situation cannot go on for too long before companies such as Millfield drown in a sea of filing cabinets. Indeed, Millfield have taken the initiative to consolidate their records management by implementing Invu's electronic document management system, which has enabled them to take over 200,000 client files out of the sales location. The company estimates that this has led to a 23% increase in efficiency and time saving for the administrative staff alone.

It is clear that those operating in the mortgage industry should make sure they find the appropriate solution for their needs. It is evident that they do need some sort of document management system. However, it is crucial that the solution they implement is the right one for them.

From our experience, mortgage brokers have to look out for several distinguishing features before deciding to buy. The solution has to enable them to find and retrieve documents quickly and easily whenever required. It also needs to be able to capture these documents and file them in the most relevant and easily reached place. The most efficient way of doing this is electronically - that much is a given.

One of the crucial factors is to choose a system that will not disrupt the way the company operates. The system has to not only be easy to use, it has to be installed in the quickest amount of time with the minimum of disruption to the operations. There is simply nothing worse than technology impeding a job, rather than assisting it. This means that any electronic document management system taken on by a mortgage broker or IFA has to run smoothly with the key applications that are used on a daily basis , such as the leading web-based mortgage processing software, Dashboard. Trained system integration consultants are needed to install and deploy it across the firm.

So, what should the mortgage brokers and IFAs be looking for? An electronic document management system that will be easy to install, need no technical knowledge to operate and will enable staff to find and retrieve documents easily and quickly and remotely when necessary. It should stand up to regulatory scrutiny, with full audit trail and version control of key documents, so as to provide protection to brokers and the clients themselves It also has to be proven to help the company save time, reduce co sts , free up staff for more productive work and see a fast return on investment. Is this Nirvana? No, just Invu.

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