First published by Mortgage Solutions
The latest ‘Dear CEO…’ letter to mortgage firms might be regarded as a shot across the bows of our sector by some, but certainly from our perspective, its contents should not be new to anyone who takes regulation seriously and is focused on driving business standards higher within their business.
I suspect that a large majority of firms, whether AR or DA, network or other regulated entity, are already carrying out much or all of what the regulator requires and is focusing on, however such missives can obviously be useful not just in terms of knowing where the line of sight is for the regulator but in providing certain market participants with a shove in the right direction.
The three key areas of potential harm outlined by the FCA – consumers purchasing an unsuitable product, consumers paying excessive fees and charges, and the risk of fraud to all stakeholders – should be widely understood and, certainly for advisers, should be on their radar as a matter of course.
Of course, advisers need to demonstrate why consumers have been advised to take a certain product, although as many in our sector have pointed out, this is never just about price, and as market commentators have said repeatedly, advisers are well within their rights to advise based on other factors, such as service.
Firms must, of course, also clearly detail the fees that are payable by the client, and what the impact, for example, of adding them to the loan might be over the course of the mortgage term.
Plus, the threat of fraud always exists and we all need to ensure we are doing everything possible to counter this, whether it’s having the most robust systems and processes in place to determine whether a case appears fraudulent, or providing advice and support to clients to ensure they do not leave themselves open to, for instance, cybercrime such as requests to transfer funds to rogue bank accounts and the like.
Clearly, for those businesses like ourselves who are responsible for large numbers of broker firms , we stay very close to and focused on the regulatory requirements and this is a constant review process, but it’s still worthwhile for the regulator to address the sector, outlining its own priorities and reminding market participants of their responsibilities.
What is perhaps even more vital here is the action that regulated businesses take when they come across bad practice within broker firms. Because, quite frankly, it is fine having systems and processes in place, but clear and decisive action must follow when poor work is discovered, whether it be deliberate or otherwise.
Networks routinely suspend advisers when it has been found that they do not comply with the firm’s practices or meet the required standards, and we make no bones about terminating the contracts with firms (and de-authorising) if breaches have been serious enough to justify this action.
It’s perhaps what happens after this that will go a long way to improving standards across the industry. Those serious infractions which have resulted in consumer, or indeed, firm harm must be widely understood and known such that firms have access to that information in order to make decisions about who they are authorising. Sometimes it feels like it is too easy for poor advisers to resurface elsewhere and to continue running the risk of consumer detriment, when they have been censured for poor conduct by other organisations.
There will, of course, always be bad apples in any industry, but when those individuals are found and dealt with, industry participants need to take clear disciplinary action and prevent advisers from popping up elsewhere with the risk that they would continue to deliver poor advice.
Certainly, as a network we are committed to ensuring all our advisers and firms work to the highest standards, which doesn’t always make us popular. In fact, in the trade press recently, I have seen us referred to by advisers as ‘harsh’ in compliance terms. Given the need to improve industry standards and consumer protection, I’ll take that as a compliment.
Rob Clifford is Chief Executive of Stonebridge