Mortgage lenders should be less cautious about breaching the line between information and advice, the FCA says.
The regulator has today published its post-MMR thematic review into advice and distribution, which identifies a number of areas where intermediaries and lenders need to improve their practices.
The review found some lenders had adopted a cautious approach to providing information to customers, to mitigate the risks of unqualified staff providing unregulated advice. In some cases this prevented customers from accessing information about products unless they spoke to an adviser.
FCA acting director of retail lending supervision Philip Salter says: “Some firms were so cautious about not giving advice they would not answer basic questions about their product range. There really is no problem with them doing that.
“We have issued guidance on this and I think we have been clear enough. There is scope for firms to be less cautious.”
The report raised concerns about the “limited oversight and controls” in intermediary networks, while it said many lenders operate structured processes which are not flexible enough.
But Salter refused to expand on the regulator’s biggest concerns about the practices in intermediary firms and lenders specifically.
He says: “It wasn’t black and white, which is why the report did not try to portray it in that way. There was a mix of good and bad practice among different types of firms.”
Salter says the way networks are structured means effective oversight of advice is particularly challenging.
He says: “There is a challenge in the model to ensure that the range of different members all give a good, clear and consistent customer experience.
“The best practice examples we saw sat somewhere in the middle of an overly structured model and one with limited controls: one with sufficient structure to ensure all the required information was collected, but with enough flexibility for the adviser to treat each customer appropriately.”
The FCA has provided individual feedback to firms involved in the review, setting out any actions required.
But Salter says this does not include any formal supervisory actions such as past business reviews.
He says: “The aim of this piece of work is to educate, assess where we have got to and to provide information that improves standards across all firms. It was not to identify where we might need to use formal powers.
“We are only a year into the MMR and the results are never going to be perfect.”
The review found that advice was suitable in 59 per cent of cases, and unsuitable in 3 per cent of cases. The remaining 38 per cent were deemed “unclear”.
Salter says: “The ‘unclear’ cases were where the adviser had not collected all of the information that was relevant to providing advice.”