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AMI warns FCA proc fee ban would harm consumers

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Any move by the Financial Conduct Authority to ban procuration fees in favour of charging for advice would be harmful to consumers, the Association of Mortgage Intermediaries has warned.

The regulator is currently looking at proc fees as part of a wider consultation mortgage remuneration.

The latest AMI quarterly review says: “In order to pay for the cost of giving advice – and the cost of advice given on applications that do not complete, removing proc fees in favour of charging the customer is likely to deprive the most vulnerable from advice they badly need.

“This is particularly troublesome in a market where the most vulnerable customers may have to take advice to purchase a product but cannot afford the advice in order to do so.”

The broker trade body says a referral fee system is also problematic.

AMI says: “Advice is currently regulated in siloes, necessitating multiple qualifications, permissions and regulatory fees for advisers wishing to operate across multiple siloes.

“In order to minimise cost and risk within the constrictions of existing regulation, but not compromise on the quality and breadth of advice given to customers, advisers have adopted a referral structure. This serves customer needs well and allows advisers to remain commercially viable.”

AMI says its members increasingly feel pressure to secure permissions across mortgages, consumer credit, debt consolidation, retirement and investment.

The trade body adds: “AMI would like to see clarity issued by the regulator on what components of the interaction between adviser and client constitutes advice across all of the areas of need that the average consumer has. These dynamics are intrinsic to assessing the need for referral fees in the market.”


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  • Carl McGovern 13th April 2017 at 5:37 pm

    If the FCA want to ban proc fees, then perhaps they should make all Mortgage adviser civil servants and the state pay our wages. After all, if the general public can no longer take Mortgages out, because the can’t afford the fees for advice, the economy would grind to a halt.

  • Chris Hulme 13th April 2017 at 10:22 am

    It would indeed be a disaster for the industry as a whole but even more so for clients. In addition to the points raised below of advice being unavailable for those who cant afford to pay 0.5% as an advice fee I suspect any advisers who then did charge fees for advice would do so but would then steer the clients to apply for the mortgage directly to the lenders themselves thus alleviating the broker from all the grief and hassle of actually getting the application from concept to reality. I wonder how many lender would be like that scenario to happen or have even considered it as a possibility? Lenders – you have a cross to bear on this as well you know!

  • Stuart Gregory 13th April 2017 at 10:05 am

    I’m sure lenders would love this to happen – let’s face it, the majority are still paying proc fees at 2007 levels! For clients, it would limit the accessibility of advice – we’re in an industry where prior to the recession ‘free’ mortgage advice was the norm. Lots of work has been done since to inform clients of the importance of our role in the process. Doing work for ‘free’ undermines the industry profile – we shouldn’t have to apologise for needing to cover our costs.

  • bill keighley 13th April 2017 at 8:47 am

    Removing proc fees would seriously impact on the capability of the industry to deal with demand and push customers back to the banks which is where the most complaints come from, not brokers. The AMI really need to leave alone what isn’t broken……who actually places business with a lender because they give 0.05% higher proc fee anyway?????

  • Derek Frost 13th April 2017 at 8:26 am

    I concure wholly with the points as presented by Samantha Cox, but the other potential unintended consequence must almost certainly be that the ‘cost of advice’ to mortgage clients will rise. This will emanate from current ongoing call for procuration fees to rise, which is indeed a fair call given the additional cost born by mortgage intermediaries in recent times, but isn’t it likely that given the ‘freedom’ to charge fees, they would rise substantially above the current norm of c0.32%+, possibly to 0.75%? How could that possibly be described by the FCA as a “best outcome”?
    With lender margins already very slim, they’ll be unlikely proponents of reducing payable rates to accomodate the cost burden foisted on clients!

  • Samantha Cox 12th April 2017 at 5:51 pm

    This sounds similar to what happened with pension advice, people need guidance yet won’t pay for advice, and IFA’s are not remunerated anymore and cant’ work for free.
    i’d estimate 75-80% of 30-40 year-olds have little or no personal pension provision, this is a huge disaster waiting to unfold 20 years from now. Goodness only know what it would mean in the mortgage market, a very silly idea FCA! Lenders have just started to really appreciate and value the work done by the intermediary market, and the importance of independent advice for the consumer, why on earth would you now want to ruin it all again?