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Advisers query FCA stance on loan commission

The FCA’s refusal to ban commission in the mortgage market is “inconsistent”, according to life and pensions advisers.

The regulator confirmed last week that it had found little evidence of bias and therefore ruled out a commission ban as part of its upcoming mortgage market reviews.

However, advisers already subject to a ban as part of the RDR have questioned the decision.

Advice and Wealth Management Solutions partner Clayton Cumming says: “You have got to ask if they are still happy for there to be the potential for commission bias within mortgages because, at the end of the day, that’s still giving financial advice.

“If there are businesses out there that pay different levels of commission then there will be questions of bias, and there should be grounds for a change to bring these businesses into line.”

Alpha Investment and Financial Planning director Alan Solomons adds: “You need a level playing field and, if there’s commission, theoretically at least there is the opportunity of bias. So what is in the customer’s best interest? This does seem inconsistent.”

However, Association of Mortgage Intermediaries chair Pat Bunton hit back: “The life and pensions firms can say that but their market saw the RDR precisely because of huge discrepancies in the amounts of commission.

“Procuration fees in the mortgage world typically vary by between 35 and 40 basis points. The sort of discrepancies that happened in their sector simply don’t exist.”

Over the next year, the regulator will conduct three reviews of the mortgage market: a post-MMR responsible lending review; a more general review of the mortgage market to see if it is working effectively; and a review into financial advice – including mortgages. 

The FCA is yet to clarify in detail what the more general mortgage market and financial advice reviews will cover and it will launch discussion papers later this year.  

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