The latest figures from UK Finance on product transfers should give everyone who advocates the positives and benefits of mortgage advice something serious to worry about.
While it’s obviously pleasing to see substantially over half of all product transfers being conducted on an advised basis, we have seen a worrying increase in the number of non-advised transfers, up to 135.5k in Q3 from 128.4k in Q2 this year.
When confronted by such statistics, you would anticipate that most of us advisory firms active in this market would ‘double down’ on our messaging – in other words, consumers should take the product transfer offer from their lender to an adviser in order that they may judge it against the rest of the market and the client’s current circumstances to see if it is the right product for them. Then the adviser can place that product transfer business and the client gets all the normal and necessary protections they would get through using advice.
It doesn’t seem rocket science to us, and while it is worrying that this message perhaps didn’t get through to 135,500 existing borrowers, we should not detract from it. Non-advised, execution-only business might seem like the right product but that can be far from the truth – the problem being that the borrower is never going to know, only perhaps when it is too late.
But, what gets our collective goat and seems to fly in the face of the foundations of our profession and the work we carry out, is the fact that we have some mortgage advisory firms – most recently, online broker, Mojo Mortgages – launching execution-only service which are going to effectively encourage customers not to take advice because they will offer specific, one is led to presume, ‘cheaper’ products via this channel.
In this world, the adviser makes a decision on whether the consumer needs advice or not; if the latter, they provide a ‘choice of products’ at which point the consumer is told to pick one, with no advice, putting full responsibility back with them. Are we the only ones who see this is a real ‘grey area’?
Firstly, with this dual proposition, how is the consumer meant to know what you are and aren’t responsible for? You say you’ve not provided advice but you’ve given them a choice of products – couldn’t that in itself be construed as advice anyway?
In the future, what happens if a consumer decides the product they chose was completely unsuitable for them – a 10-year fix when what they truly required was something far shorter? How might FOS view such a complaint? Could the consumer argue that they believed the provision of a choice of products constituted advice? FOS tend to favour consumers in such complaints – even more so, when the firm concerned had the ability to provide advice but decided against it.
Let’s weigh that up. A mortgage advisory firm encouraging ‘clients’ not to take advice. This is not so much a dereliction of duty as completely undermining the notion of quality advice being a service worth taking. Do firms planning on providing such ‘services’ – and we use that in its loosest of terms – truly understand what they doing? The messages they are sending out to ‘clients’? The trouble they are storing up for themselves? It would seem not.
We’re not quite at Christmas yet, but if there is a more apt way to describe this than ‘turkeys voting for Christmas’, then we can’t think of it. Every single adviser worth their salt will have plenty of experience of clients who believed they had found the perfect product for them – and it is also normally the cheapest one they’ve seen – and yet after doing our actual job, we found that the product was not the most suitable. It’s not even in the top thousand because it comes with a large fee, or they didn’t take the ERC into account, or it’s over a term that simply isn’t suitable for them. You know the drill – the list goes on.
So, why on earth, as supposed professional advisers in this marketplace would we be encouraging borrowers not to go through this process, and instead leaving it up to the borrower to find the most suitable product, knowing full well that in all likelihood they’ll opt for the one which makes the grade because it happens to be the cheapest monthly mortgage payment. Regardless of anything else.
Such firms tend to say they are competing with the ‘big aggregators’ in our market, when the fact is the latter are making very little progress, and those opting for such dual propositions are effectively the mortgage equivalent of the emperor’s new clothes. It’s not really FinTech and it certainly doesn’t meet the full end-to-end mortgage business brief that many are peddling – one wonders whether the investors are truly aware of what is being offered and how it is no different to what everyone else is able to deliver?
Overall, however, as advisers we should all be concerned by services which devalue advice, especially when its advisory firms that are pushing this message. It further perpetuates the nonsense that ‘cheapest is best’ and it facilitates poor choices and poor outcomes. The fact that this is coming from certain mortgage advice firms makes it all the more galling – is this really the right message we want to be sending? We sincerely hope not.
Rory Joseph is director and Sebastian Murphy is head of mortgage finance at JLM Mortgage Services, the mortgage and protection network