When the FCA’s Mortgages Market Study Interim Report came out, there were a number of proposals which didn’t seem to land too well with the intermediary sector. One of those was around a broker assessment or comparison tool, which it appears the regulator wants in place to allow consumers to more easily compare the services of mortgage advisers.
Over the past few months, there has been plenty of debate around this – how it might look, what criteria it would use, how it might be used by consumers, who would be in charge of it, who would police any mis-use, etc, etc. While many stakeholders thought, in theory, it might be a ‘nice to have’ for the industry, it seemed obvious to many that the practicalities of bringing it all together and making it both relevant to consumers, and fair to firms, was going to be difficult.
At FSE London last week, it became clear just how difficult the development of this tool is proving to be. In an update from Robert Sinclair of the Association of Mortgage Intermediaries (AMI), it was revealed that a working party has been established and AMI sits on it. The aim of the working party is to find a solution that works for all but when you hear words like “struggling” and “anti-competitive” bandied around in relation to this tool, then you can probably tell that all is not smooth sailing.
Robert talked about a “question mark over how this works at the back end” especially in terms of the criteria that is used to compare firms. He worries that, rather than making this part of the market more transparent and more competitive, it does exactly the opposite, simply because of the data that is used to distinguish between firms and how the ‘results’ are presented to consumers.
How can consumers compare two different firms? What methodology is in place and does that information actually tell you about the service of that firm in the first place? As was mentioned at FSE London, could it be based on complaints data? Well, maybe so, but so few mortgage advice firms even appear on the regular Ombudsman complaints lists – because they do not meet the 25-case threshold to appear – that this doesn’t appear to be very meaningful.
What about access to lenders? Would a ‘WOM’ firm be more attractive to consumers than one which only has access to a limited panel? Well, possibly, but what if the firm is ‘WOM’ but product data shows that they tend to recommend only a handful of lenders to their clients?
What about client reviews? Again, there are already sites out there that do this but these could be open to manipulation and, overall, we might have a situation where the bigger firms can develop systems and processes to ensure they are top ranking. And, as mentioned, who is responsible for this assessment/comparison tool and who polices the information that appears? The FCA? I would doubt that.
At the other end of the system, if you are putting such a tool together how do you make it both relevant and understandable to the consumer? As Kate Davies of IMLA said at FSE, this could be “horribly over engineered” whereby reams of data are thrown at a consumer who is not able to gain any benefit from it.
But, at the end of the day, perhaps the most damning criticism is the potential for it to be ‘anti-competitive’ – ours is an industry full of smaller firms delivering a great service for their clients. How can a tool ensure they have a fair crack of the whip when compared to their larger firm peer group? As has already been highlighted, if you’re a firm not appearing on the first page of results then what might this do to your business? Could it put you out of business? Plus, if you have criteria which does not effectively compare apples with apples, then what good will it do for the consumer or the advisory practice.
It is perhaps not surprising that this working group is struggling to get to any result. We await an update from the FCA on how this might be progressing but, until then, a large part of me wishes it would spend its time and money on something else entirely.
Richard Adams is managing director of Stonebridge Group