Consumer Duty is a hot topic across the mortgage industry, with the implementation date so close. So we wanted to get an idea of how brokers are feeling about the new regulation as part of our latest Mortgage Lender Benchmark survey of mortgage intermediaries.
While the majority of mortgage brokers said they were prepared for Consumer Duty, there was a sizeable minority who are in less confident shape. Almost a third told us they were unsure or not ready, a troubling proportion given the implementation date for Consumer Duty is upon us.
One of the challenges around preparation for the new rules has been around how expectations have been explained. A common theme in broker feedback centred on the amount of information shared by the regulator and others on what advisers need to do, with many brokers suggesting that they wanted more detail about what meeting the legislation looks like practically.
Intermediaries told us they wanted more tangible examples of the changes they could make to their business and processes to ensure that they delivered on what the regulator expected. Others suggested that guides, templates and training sessions would have made a real impact on their preparation for the incoming legislation.
What’s clear is that among the majority of brokers, there’s a real desire to get this right. However, what’s missing is the understanding of precisely how Consumer Duty applies to their business, and specific assistance on meeting the requirements, rather than being left to interpret what one broker referred to as “a blanket regulation across the financial sector”.
Is Consumer Duty someone else’s problem?
One notable aspect of the broker feedback from brokers came from those who did not believe they needed any further support.
On the positive side, there were those who argued the information provided had been sufficient, and so they felt their business was now correctly positioned to meet the regulator’s expectations.
By contrast, others apparently dismissed the need to engage, stating that someone else was handling it on their behalf. This could be a compliance team or a network, for example, but some brokers argued it wasn’t their area or simply not applicable.
It’s certainly true that many adviser firms will have tasked some staff with leading the Consumer Duty preparations, but the reality is that the new legislation applies to everyone involved in the advice process. As such it’s vitally important that it’s embedded throughout firms, rather than sidelined as something for others to handle.
Viewing Consumer Duty as someone else’s problem, or a matter for dedicated leads to handle alone, has the potential to lead to some strife among brokerages in the months and years ahead.
Delivering good outcomes is what brokers do best
There’s a very good reason that so many borrowers opt to obtain their mortgages through intermediaries, and indeed why lenders value their broker channels. Brokers deliver an excellent experience to borrowers of all experience levels, from the service to the product recommendation.
But it’s notable that almost two-thirds of brokers told us that they felt the Consumer Duty legislation would impact their day-to-day processes, or at least they were unsure if it would.
This is further evidence of the general uncertainty so many brokers feel about the new regime and what it’ll mean for both them and the way they work. The fact that so many brokers either wanted more specific guidance of how Consumer Duty applies to their business, or who were happy to leave it to others to negotiate, speaks to the lack of clarity still present across advisory firms.
What’s clear is that even the best adviser firms will need to be able to provide evidence for how they deliver the best outcomes for their clients. Arriving at the right answer will not be enough – brokers will need to demonstrate how and why they got there.
Working with the right partners can help brokers do just that. At Smart Money People for example we offer advisers the tools for asking clients key questions about their experience, focusing on the most important aspects of Consumer Duty, and with the ability to benchmark against historical financial services market data.
Only time will tell how prepared brokers truly are for Consumer Duty, but acting now to provide evidence of the good outcomes they deliver will stand them in good stead for meeting the regulator’s expectations.
Jacqueline Dewey is CEO of Smart Money People