With FSA regulation coming into force this month, Johanna Gornitzki asks compliance guru, Branko Bjelobaba , how it will impact the market
In an industry where many people end up devoting their entire working life to issues surrounding protection, 17 years may not seem like such a long time. But for thirtysomething Branko Bjelobaba, it is certainly an astounding achievement.
As well as starting his own company before the age of 40 and holding a number of creditable industry roles, in 2003, Bjelobaba became the youngest ever Chartered Insurance Institute (CII) member to receive the Bridgewater Award for Exceptional Service - the highest CII honour awarded.
Respect
He started his career straight after leaving school and admits he fell into insurance accidentally. "Originally I wanted to do a law degree, but my A-levels were not strong enough, so like most people that work in insurance, I drifted into the industry," he explains.
Nevertheless, Bjelobaba's CV is impressive. He has worked for a number of different firms including General Accident - now part of Norwich Union - and specialist insurer, Pinnacle. Perhaps his most important role however, was as compliance officer for PricewaterhouseCoopers (PwC) between 1998 and 2000, where he conducted over 400 audits on brokers and private medical insurance (PMI) specialists.
"It was the type of job where you got a lot of respect, but perhaps for the wrong reasons as many of them feared what could happen if they failed the audit. In fact, many of them did have issues. Out of 400 audits, only about ten were perfect," he says.
After leaving PwC, Bjelobaba spent three years at the General Insurance Standards Council (GISC) as general manager, where he conducted several workshops on regulation for over 2,500 firms. It was here that he first encountered the Association of Medical Insurance Intermediaries, where he was later appointed regulation and compliance consultant - a post he also holds at the British Insurance Brokers' Association.
Bjelobaba continued working for GISC until the beginning of 2004, when he decided to start his own business. Branko Ltd, a compliance consultancy, was launched in December 2003, but it wasn't until April 2004 that Bjelobaba decided to dedicate all his time to the company after securing his first client the previous January.
So far it has been a success. "There has been enough work out there because there has been a lot to do ahead of Financial Services Authority regulation," he says.
Bjelobaba reveals that the secret to his success is not based on a groundbreaking formula. "It's not a revolutionary approach to look after the client and do what they want without stretching it out for too long."
That said, it has not always been an easy ride."Although it has been good, it has also been hard trying to explain to people just how much there is to do. The rules are immense for Financial Services Authority regulation and trying to put that into something that people can easily deal with has been difficult," he says.
Looking beyond the date for implementation of Financial Services Authority (FSA) regulation, he believes all types of advisers will experience difficulties. Nevertheless, he admits that the smaller ones will probably have more work to do in comparison with the larger firms that can employ full-time compliance staff to do it for them.
"Even the larger general broker firms don't understand what is required of them, which means the smaller firms stand very little chance of doing so," he says.
To avoid running into more problems than necessary, Bjelobaba has urged advisers to ensure they are prepared for the changing regulatory environment.
"Advisers cannot be complacent just because they have now gone through several different regulatory regimes and have filled in the form," he says.
"Filling in the form is the easy bit, it is now all about applying that to the Financial Services Authority rulebook, and with so much confusion in so many different areas and with the multitude of interpretations out there, people just can't get it right," he warns.
Does this mean that advisers may as well roll over on their backs and play dead? Certainly not, argues Bjelobaba. "It is not too late for advisers to start preparing themselves. However, they have to knock things off in an appropriate order of priority, as there is a lot to be done.
"People shouldn't think that everything has to be in place by 14 January. Theoretically things should be in place by then, but they won't have to report on where they stand until later in the year.
"As long as firms aren't deliberately ripping off customers and doing things that the Financial Services Authority does not like, it is unlikely firms will be fined or punished for any mistakes made. However, it is hard to know whether or not a firm that does make errors, will be made an example of," he adds.
All in all, Bjelobaba believes regulation will be a positive thing on the protection and health insurance sectors. "Regulation should enhance the industry's reputation as long as people are doing things correctly."
He also dismisses fears that it will force many advisers to leave the market. "I don't think regulation is going to be the driver behind any future reduction in the numbers of intermediaries in the market. We may see some mergers where people are getting together to deal with these issues collectively. But even when it comes to a one or two-man business, there is no reason why they won't be able to manage compliance as part of their everyday job," he says.
Instead, he suggests it is more likely that changes will be seen in terms of training, with a basic level of competence qualifications being introduced within the next five to ten years.
Consultation
"It would be odd not to introduce some form of examination, because when it comes to other regulated products such as pensions, investments and mortgages, you have to have a minimum level of qualification. If you get it wrong when advising on an insurance product, the effects could be much worse than if you mis-advise on a mortgage for example, so the level of competence should be at least as high," he says.
This is something that has been widely discussed over the past couple of years. However, during the consultation process the FSA decided not to press for mandatory examinations because it considers the insurance sector to be too diverse.
Considering his success in the market, Bjelobaba remains modest about his achievements, saying he has not gone out "to conquer the world". This may however, seem a slight contradiction in terms as he also confesses that one of his long-term ambitions is to one day become a Member of Parliament. "I have come second for selection twice, but I haven't been selected yet. You have to be selected to become a Member of Parliament," he says.
For now at least, he is happy with his lot and intends to continue to work as a consultant as long as there is work to do. And judging by the amount of changes about to hit the industry, it is highly unlikely his work is quite yet done.
