The Financial Conduct Authority (FCA) can come across as a modern-style policeman rather than as the friendly Bobby who will help you cross the road, writes Rob Lankey, CEO at the NACFB
Asset finance brokers have the easiest job of all. In a climate in which total transparency is king, asset finance rules the castle. That’s because there are no unknowns in the system.
Take, for example, a nice basic small van with a purchase value of £10,000. The deposit required is 20%, the repayment period is 36 months and the monthly repayment is £35 per £1,000. The small business owner immediately spots a benefit of not buying outright, but might miss the benefit of being able to see the figures.
The FCA loves being able to see figures. For an outright asset purchase, a broker can only speculate on depreciation costs, meaning an SME owner can run the guesstimates through their own optimism/pessimism filter. You may have done this yourself when reviewing what your pension, house or Bugatti might be worth in the future; your mood at the time can affect the figure you decide is the most likely.
The FCA would prefer the figure to be selected by an expert, not on the whim of the relatively uninformed individual.
Do the maths on the example of the van, and it is simple to see the cost of asset finance is £2,080, which is almost certainly less than the depreciation in its value. The saving looks even greater on a 60-month contract at £21 per month per £1,000. That you can set the figures out and reassure a client that there are – and can be – no nasty surprises is what gives the asset finance broker a big head start, from a regulatory perspective, over a broker in another field who has to include estimates in paperwork.
Jittery foreign exchange rates have rammed home the message; no news, more than bad news, drives down a currency’s value. On the flip side, people are prepared to pay more for certainty, which is also what the FCA prefers.
After so much hectoring from the NACFB on compliance, you may feel the Association doth protest too much. By and large, the industry is well controlled and the FCA is using a big stick to kill a fly – this is a view I’ve heard often.
But let me draw your attention to the spectre of clone companies. The FCA’s website carries a long list of these, but our concern is that the wrong people are looking at the list, and that consumers and SMEs are not. For starters, they probably will not even know the list exists. Secondly, you would need to be suspicious about a company in the first place to see whether it is on the clones list.
There are lots of asset finance companies on the list and there is nothing that a legitimate asset finance broker can do about that because the clients who come to you have already found a “good guy” broker. If you suspect at the end of your initial contact that they may try to shop around, that is when you might consider alerting them to the existence of scammers pretending to be from firms authorised by the FCA.
Fraudsters will use the name, firm registration number (FRN) and address of firms and individuals authorised by the FCA to suggest they are genuine. They may also claim that a firm’s contact details on the Register are out-of-date, even though the Register is, we are assured, updated each evening.
A client who sends money to a clone firm will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme if things go wrong. But because the FCA can come across as a policeman in the modern taser-and-handcuffs sense, rather than as someone who will tell you the time and help you cross the road, it’s not the first place small businesses turn to for general advice. I feel it is down to the commercial broker to keep SMEs on the right path.