Brokers who issue combined IDD may breach FSA rules
Share
Brokers who have issued Combined Initial Disclosure Documents to cover mortgage and insurance advice may be in breach of Financial Services Authority requirements.
The FSA insists that intermediaries follow up on the insurance advice and recommendations and any broker who has not may have breached regulations.
But Home Buyer Systems, a mortgage and insurance sales systems provider, says that in reviewing this part of their compliance records, brokers can generate new insurance business by revisiting clients.
Richard Angliss, managing director of Home Buyer Systems, says: “Back in the times of frenzied mortgage activity it was all too easy to give a CIDD but just not have time to get round to doing the insurance element.
“If, however, the CIDD had indicated in section three that the broker would advise and make a recommendation to the client after their needs had been assessed, the FSA would expect to find on the files that this was carried through for insurance as well as the mortgage.
“By “carried through” the regulator means that they expect to see that the broker has given advice and recommendations on all areas of protection and GI that have been stated in section two of the CIDD. Even if the customer decided they did not want to accept the recommendations the regulator would expect to see documented evidence of this.
“Brokers need to be aware that remedial action to put right any CIDD failings can be turned to their advantage. They need to use the FSA’s requirement to review their customers’ insurance needs on a regular basis to re-contact their customers. In doing so, they will not only be putting things right from a compliance point of view, but will also be creating the opportunity to earn additional commission.”
Readers' comments (6)
Anonymous | 23 Jul 2010 4:28 pm
Yet another hanging offence from a regulator with nothing better to do (I don't think).
Unsuitable or offensive? Report this comment
Peter Gladdy | 23 Jul 2010 5:25 pm
HBS are perfectly correct in their reading of the situation and that there is an opportunity to generate further business. Much more importantly there is the opportunity of ensuring that the client is fully protected and fully understands the risks of not receiving full advice in this important area.
many intermediaries will issue a CIDD at the outset but choose to deal with the mortgage at 1st and 2nd appointment and the protection at 2nd or 3rd appointmentsd. If the client chooses not to be advised on insurance after the intermediary has explained its importance then it is extremely important, for the reasons explained by HBS, for the intermediary to issue an IDD showing that advice was not given on protection and also to record the discussion in their notes. This is of course different from providing advice and the customer not choosing to accept it.
Unsuitable or offensive? Report this comment
Ballbag | 24 Jul 2010 9:37 am
Do we have to go back to having to give out a different IDD for each product area? To avoid confusion I used to have mine printed on different colour paper because they all looked the same. Being an IFA, some clients ended up up with a whole rainbow of paperwork to line their recycling bin.
My CIDD covers investments as well, am I supposed to give "documented evidence" of this as well?
I would propose changing the wording to add at the beginning "if you want us to..."
What a load of nonsense this all is, and just think how much these clowns are being paid.
Unsuitable or offensive? Report this comment
Bobby Welsh | 24 Jul 2010 6:56 pm
Surely if the Suitability Letter states that the client specifically asked to be advised via focused advice on their mortgage after a CIDD has be provided at first appointment then this is still compliant?
Unsuitable or offensive? Report this comment
Harold Palmer | 26 Jul 2010 10:21 am
Another scare story headline from an interested party trying to drum up some business! As the CIDD will have been issued at the initial 'meaningful' contact how can a broker be 100% sure that the client will actually have the demands or needs to take ANY insurances? The relevant rule - MCOB 4.4.1 c) ii) - clearly states that it's fine to issue a CIDD if the broker has 'reasonable grounds' to believe that they will be offering services relating to both mortgages and insurance. So much for breaching rules!
Unsuitable or offensive? Report this comment
Anonymous | 26 Jul 2010 1:28 pm
I agree 100% with Bailbag - would he agree to run the new, replacement FSA?
I believe that the CIDD is important from a company perspective - it shows the client the services available regardless of whether or not they choose to use them.
I have experience of clients who have declined protection advice, been issued with a mortgage IDD and then subsequently arranged their own cover. When asked why they did not request advice when they had changed their minds I was informed that they had referred to the IDD and insurance was not mentioned on it!!!
You just can't win!
Unsuitable or offensive? Report this comment