I’m going to start with a point that you might have thought was rather incontrovertible – namely that, when it comes to the mortgage market, professional advice delivered by authorised, qualified and regulated individuals/firms is a good thing.
Indeed, the entire industry went through a process – the Mortgage Market Review – which was effectively based on this truism. Namely that not only is advice good, but we should encourage it because consumers get access to a wide choice of lenders/products, they get the protections that advice affords namely access to the Ombudsman and the Compensation Scheme, and by securing advice there will be less chance of consumer detriment when it comes to their choice of mortgage and whether it’s ultimately right for them.
All well and good you might think. So, it’s a rather odd state of affairs to find the regulator that introduced the MMR now writing that some consumers have been ‘unnecessarily channelled into advice’ (!); that advice for some is simply not required. And the reasoning behind that?
Well, the FCA looked at a group of consumers who didn’t take advice pre-MMR and because the vast majority of them didn’t fall into arrears or get into trouble with their payments, have their homes repossessed, etc, it has concluded that advice isn’t necessary.
Despite us now being in a post-MMR environment, in a much more complex and competitive mortgage market, where there are many more options for consumers than pre-MMR, and where not only have many lenders changed their entire processes to reflect this pro-advice world, but this has led to a significant increase in the uptake of advice.
When you write it down like that, it is all rather bewildering. Instead, it now appears that the FCA would much prefer this type of consumer who it has pronounced no longer needs advice – indeed shouldn’t have had it in the first place – to ultimately be ‘channelled into…’ an online, execution-only process because they’re less likely to get into financial difficulty regardless of the product they end up choosing for themselves.
If you’re having difficulty getting your head around this stance, then you’re not the only one. Indeed, given that I’m now working in a sector – conveyancing – where we are actively trying to encouraging the take-up of advice, and where we’d like mortgage advisers to carry out more, because we believe it’s in the best interest of all especially the client, then it seems even more out of kilter with the prevailing mood and the route the regulator has taken up until this point.
From our perspective, the last thing we really want is for the client to go off and try and work their way through an area which is not particularly well understood, such as conveyancing, and who is not best placed to provide the service they need. Far better, we think for the client – who has already put their faith and trust in the adviser in terms of their mortgage – to continue using their adviser in an area like conveyancing. To secure the advice they need, to feel they are with the right firm, to get the service they want and to also have the adviser available to them to ensure they can guide them through the process, especially one which can take longer than any of us would like.
We want more advice in this space because we see the clear benefits it brings in other product areas, and because ultimately we believe that the consumer gets far more out of this than were they try to muddle through on their own. So, why a regulator might be actively encouraging consumers to do exactly this, is rather beyond me.
In that sense, the criticism that has been thrown the way of the Final Report, in particular it’s appreciation (or otherwise) of advice seems completely justified. In other areas – such as finding the right deal, having clients ‘overpay’ for their mortgage and placing ‘incentives’ over quality of advice and suitability of product – there also appears a concerted effort here to erode trust in advice and advisers’ work. While at the same time, agreeing that the market works well and there is no customer detriment from this which requires any regulatory intervention. Work that one out if you can.
We wait to see if this truly will result in a major change in the direction of regulatory travel when it comes to advice but, from our perspective, its importance has not wavered and if anything it has become even more vital, right across the mortgage and housing piece. If only the regulator thought the same way.
Mark Snape is managing director of Broker Conveyancing