Nothing wrong with lenders giving ‘advice’, says FSA
Share
Mortgage lenders should still be able to say they offer advice, even if they do not compare products from across the whole of the market, says the Financial Services Authority.
Speaking at the Council of Mortgage Lender’s conference today, Sheila Nicoll, director of conduct policy at the FSA, called for the European directive to be changed so lenders can claim they offer advice, even if they are just advising on their own products.
She told delegates: “As first drafted, the European proposal means that only those firms who look across the whole of the market can give advice. We think this is a much too narrow view.
“In the UK market, around 50% of consumers who buy directly from a lender benefit from that lender providing advice on the best product in their range.
“There are also consumers who benefit from advice from intermediaries with a limited range of products. Consumers should, of course, be able to opt for whole-of-market advice – an option taken up by more UK consumers than in any other member state.
“But the advice provided by lenders and other intermediaries still forms an important service – which the Directive will prevent unless changes happen.”
She also says it is also concerned that the directive captures a number of areas of lending that it would classify as niche, such as bridging finance, high-net worth borrowers and credit union lending.
She adds: “These are areas that require a tailored approach that recognises their different characteristics. Given that cross-border sales in these types of lending is unlikely, we think it more proportionate to let member states deal with them at the national level.”
It also has concerns about the level of detail required in advertising and generic material the directive is suggesting.
She adds: “ This risks information overload, and consumers simply switching off rather than engaging. We’d like to see a better balance being struck.”
Speaking about the Mortgage Market Review, she says it will be updating the industry soon.
She says: “One thing I can assure you of is that we recognise that, as with any new rules, we will need to give time for you to adapt between the making of any new rules and when they come into force. And we will ensure that the timing is sensibly aligned with international developments so that the burden of changes is minimised.
“We hope that, following the publication of our Consultation Paper, we can continue to constructively engage with all on how we achieve our aims.”
If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat
View results 10 per page | 20 per page
Readers' comments (14)
Jonathan Burridge | 3 Nov 2011 1:04 pm
Lenders should give advice and it should be explained that the advice is based upon their limited products. I see all too often situations where a client has taken a product supplied by their bank believing they have been advised to take it, only to find out that the lender is not accountable because they have only provided information.
The current set up is a nonsense and should be changed for consumer protection.
Unsuitable or offensive? Report this comment
Mike | 3 Nov 2011 1:16 pm
Of course they can give advice! They have previously advised on PPI, paid for packaged bank accounts,investments etc. What planet do most of the FSA directors come from? Oh yes! Planet 'revolving door, ex banker - nose in the trough!', that's what planet!!!!!
Unsuitable or offensive? Report this comment
IAN WINDSOR-SMITH | 3 Nov 2011 1:43 pm
Lenders Have never given advise - THEY SELL PRODUCTS. Always will, they are not client/customer centres. Dont forget they must take out PPI etc in order to increase the sale, now that really is top in BEST ADVICE? brass in pocket! FSA in cohoots
Unsuitable or offensive? Report this comment
AA | 3 Nov 2011 1:51 pm
It maybe nothing to do with the above but a good friend of mine called me (whom is employed by Lloyds) this week and asked me to do a whole of market cross check for his client (whom was his mate as well).
The enquiry was in regards leaseholds and with it only being 50yrs left, he may have a problem placing it with its current range.
Therefore i advised him to send it my way and the client would be offered a 3.8pc approx rate and should go through quite straight forward. He decided and stated that my advice was worst case scenario and he'll try and get the vendor to extend the lease to 70yrs min (to fit in criteria) and offer the client an approx 4.6pc rate on a 85%LTV.
Thats what i call good advice.
Unsuitable or offensive? Report this comment
Anonymous | 3 Nov 2011 3:07 pm
FSA in pockets of the lenders again..With what lenders have got away with over the years would see most of us brokers eating porridge by the wheelbarrow load. One rule for them one rule for us, when with this ever end
Unsuitable or offensive? Report this comment
Jeanette Nicholls | 3 Nov 2011 7:41 pm
Couldn't agree more with the previous post asking what planet the FSA is on. Why don't they just admit they don't want any brokers in the market place? Banks do not advise- THEY SELL THEIR OWN PRODUCTS! And Joe Public thinks its advice but what does the FSA care? Unbelievable!
Unsuitable or offensive? Report this comment
Moore | 4 Nov 2011 10:50 am
the advice process should be totally independent of product providers, imagine a world where a GP can only prescribe the medication from one drug company.
Unsuitable or offensive? Report this comment
Kevin Vella | 4 Nov 2011 11:38 am
I have no problem with clients speaking to their bank and use this positively to compare and get my client a better deal. Agree that lenders need to ensure that clients are aware (and I don’t mean some small print somewhere!) that they are only able to advise from their own products. As I say to my clients the bank mortgage advisor looks after the bank’s best interest however I look after the client’s.
Unsuitable or offensive? Report this comment
Grey Haired Underwriter | 4 Nov 2011 12:30 pm
I read these comments witha great deal of sadness and it only goes to emphasise that most brokers seem to equate best advice with price. A mortgage is a complicated financial instrument that is often taken over a long period and it is surrounded by numerous issues such as the quality of the security, the debt servicability, the credit worthiness of the applicant and so on. I would therefore argue that a lender with mortgage trained staff is readily able to offer as good a level of mortgage advice as any broker.
I understand that price/product is an issue but it is only part of the advice not the be all and end all.
I can certainly say that my sales colleagues will direct a customer to an independent advisor if they feel we cannot meet the customers needs although i understand that targetting at large lenders may make some advisors more avericious. Having said that I have met plenty of greedy brokers giving poor advice in exchange for an enhamced proc fee - anyone for sub-prime?
Unsuitable or offensive? Report this comment
martin@Tapperfs.co.uk | 4 Nov 2011 1:51 pm
Sheila Nicoll, director of conduct policy at the FSA would have failed her CeMAP test if she had given that response!
It is a open and shut case; lenders sell their own products, they are biased, they do not have any knowledge of anything but their own products and as such are not capable of offering independent advice.
Consumers have benefited from independent advice immensely over recent years and the only source of such advice is through whole of market independent IFAs.
The idea attacks the fundamental concept of TCF. If this proposal sees the light of day I suggest that the bank disclosure documentation would state that the bank does not have access to the full range of products on the market and is not offering independent advice.
If banks want to offer advice on their own products it means that they want to be seen to be acting in the client's best interest. This is completely anathema to the present situation! Banks cannot have it both ways.
Unsuitable or offensive? Report this comment