The FCA’s recent paper on ‘Mortgage advice and selling standards’ was always going to attract some extreme reactions and that has proven to be the case.
My own initial review highlighted the increased encouragement and support from the regulator for execution-only channels and, in my opinion, pushes too far in this direction. A number of those encouraging the regulator to move down this route will no doubt have suggested that advice has been placed on a pedestal since the introduction of MMR and that such a move was required.
I agree that advice has been elevated to such a special status but can see no reason for this not to have been the case back then, or indeed for any move away from it now.
In fact, looking at the increased complexity of the mortgage market itself and the product options available (a whopping 14,000 plus), coupled with the changing circumstances of most borrowers, there appears to be a strong argument to suggest that advice is more vital than it has ever been. That the potential for choosing the wrong product via an execution-only channel is higher than ever before, and therefore the potential for significant consumer detriment has also grown.
Clearly, the FCA disagrees with this and have moved from a position whereby execution-only was deemed to be inherently riskier to a typical borrower, where this is deemed to no longer be the case. I’ve seen this described as moving to a ‘neutral position’ – I’m not sure I agree.
However, there is a lot to be said for taking these rule changes from the theoretical into the practical realm of delivering execution-only mortgages to customers, and (like AMI’s Robert Sinclair) I can still see the delivery of this fraught with issues, not least around the ‘trigger’ for advice and when consumers might well feel they’ve received advice when technically they haven’t.
Such cases are bound to happen, and it will be the Ombudsman that acts as the final arbiter on determining such decisions. Indeed, were I the one looking at pushing execution-only, or setting up such a service, I think I’d want to be very clear on what the Ombudsman think on such complaints before I went ahead. This is likely to be a channel littered with potential misunderstandings especially when you have firms ‘suggesting’ product options – might this not be construed as advice?
Due to this uncertainty, I think some of the more severe predictions about what these changes might mean to the intermediary market are somewhat premature and not truly anticipating just how they might land. For instance, predictions that the broker share of the market will fall more significantly during the next 10 years are arbitrary to say the least. I don’t agree.
Compare and contrast with how intermediary firms themselves currently feel about the market and their future within it. IMLA’s latest sentiment tracker showed that an overwhelming 93% of advisers felt confident about the prospects for the mortgage industry, while 94% were confident about the intermediary lending sector. And when it came to their own individual businesses that confidence was even greater, up to 97% reporting they believe their own future is very positive.
At Stonebridge we hold a similar level of confidence, and we know our AR firms feel incredibly positive not just about the next few months, but the years ahead not least due to the support they receive from our network. It’s imperative that, confidence is matched by action and not every firm in the industry, for example, is getting access to the growing number of opportunities that are available to them, or indeed taking full advantage of the ones they can access.
If we are moving into an environment which does see market share under threat for the intermediary – and I’m not convinced it will – then we must acknowledge the importance of ensuring clients get access to as many different products and services as they can possibly need. Allowing a client to go elsewhere – unless it is from your own introduction – should not be up for discussion and an attitude which is based upon activity across every single client product/service need is absolutely essential.
In that sense, broker firms will need to ensure they have the right support and relationships to get the most out of the market and every opportunity.