Service that lenders provide clients direct is not one of advice, but of execution only
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Having read about Mortgage Strategy’s Define Advice campaign in last week’s issue I feel somewhat contented that there is a suggestion that lenders dealing with clients direct should not be able to use the term advice.
The service that lenders provide direct is nothing more than that of execution. Having worked for a retail bank as a mortgage adviser I have seen how mortgage business is carried out and have seen first-hand clients being offered solutions that would not have been best advice.
Instead they have been provided with the best out of a limited range of options.
For example, a customer was recommended a two-year fixed rate deal but on review of the fact-find the client had clearly stated that they wanted to budget for the next three years, prior to their children starting school, which would have allowed them to work to increase their household income.
The bank at the time had no three-year fixed rates, hence the two-year recommendation. Where was the advice? Yet this client was clearly informed that advice was being given.
When an adviser works for a bank or lender they are never going to give consumers advice which could lead to the mortgage deal falling through
At this time there were a number of three-year fixed rates on the market and had this client visited an independent broker they would have received the right advice and subsequently been provided with a three-year fixed rate to satisfy their requirements.
When an adviser works for a lender or bank they are never going to give clients advice that means that they don’t do the deal. Would an adviser working for one bank tell their client that another bank has a better offer? Certainly not, as this conflicts with the targets they have been set and with the lender’s mission to gain market share.
I guess this is understandable because you work for the bank you are employed by. But, as in the case above, to recommend a product available in the lender’s range as best for the client is not advice - this is just the best the bank or lender can provide.
It is not enough for lenders to say to clients in the Initial Disclosure Document that they only make recommendations from their own product ranges because most consumers have no idea that they can seek independent advice and end up in a better financial position if the provider cannot offer them what they need.
So something needs to be in place to differentiate the service that a lender offers.
The only way consumers can obtain advice is by speaking to independent brokers who advise from across the whole market or who have access to a panel of lenders that is representative of the whole market.
Banks and lenders do not have clients’ interests at heart when doing the things that I have highlighted above.
Let’s ensure that regardless of the approach consumers make when dealing with their finances they have clarity and understand the options available to them. If they want to deal with their bank that’s fine but they need to be informed about the options available.
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