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FCA to investigate advice rules as part of competition study


The FCA will investigate whether its rules around advice reduce competition in the market.

In a call for input on competition in the mortgage market, published this morning, the regulator recognised that where advice is lengthy and does not engage the customer, competition can suffer.

However, it did stress that its rules on advice “do not prescribe how and advised sale must be conducted or the length of time it must take”.

Since the Mortgage Market Review launched in April 2014, lenders’ advice processes have tended to be much lengthier than brokers’. Today’s feedback statement suggests the regulator could also look at whether its rules favour brokers over lenders and if that benefits the customer.

The FCA says it will look at its advice requirements as part of its market study on competition, the terms of reference for which will be announced before the end of the year.

Today’s feedback statement says: “As part of our general interest in the impact of regulation on financial services, we are keen to ensure that our rules work towards maximising the potential benefits that consumers can get from the advice process. In assessing whether that is the case, we are interested in the impact of our rules on specific types of consumers.

“We are also interested in assessing the impact of our rules on market dynamics more generally. We want to know whether, for example, the regulatory framework favours some distribution or business models to the detriment of others, and whether that is ultimately to the benefit of consumers.

“As part of this, we are also interested in whether our advice rules, which do not aim to differentiate between interactive channels, may have inadvertent impacts on innovation.”



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  • Arron Bardoe 16th May 2016 at 8:33 pm

    It is not the rules that are wrong, but the compliance departments of lenders that have gone over the top with their requirements and forgotten about the customer in their process.

    MMR is broadly right and most brokerages have manage to implement both the compulsory requirements and, more importantly, the spirit of the rules.

    Having recently sought a direct deal with a lender, I went through a 1.5 hour phone conversation (F2F would have been longer) to ensure I met the criteria. Thereon, I was referred to an “adviser” for my first of 2 chats over the phone. Almost 2 hours in to the first of those chats, it was simply too painful and so I went elsewhere for a higher rate.

    At no point was I given “advice”, but instead taken through a written process that could have been automated. The adviser was not allowed any deviation or rapport building except 1 or 2 staged questions.

    The adviser asked me how much I could afford and would not proceed until the term I wanted match exactly the payment I wanted to make, so I went online to calculate the payment and rounded up to the nearest £10 and stated that as my budget. At this point, I was able to move to the next step.

    Then she asked me to detail every penny that would be spent, despite applying for an offset mortgage where I simply wanted a larger facility that I initially wanted in case I wanted to draw more in the future. Were they to offer an online option, I would have gladly proceeded that route and avoided advice altogether, which I suspect would be the view of many other customers.

    The FCA should double check its rules are not the cause and let market forces resolve this problem. Initially, more customers will approach brokers until lenders realise they are losing business and at that point they will review MMR. Major banks can spend far more on compliance functions than brokerages, so why are brokers getting right and lenders getting it wrong?

  • Derek Frost 16th May 2016 at 12:25 pm

    Surely “the regulatory framework favours some distribution or business models to the detriment of others” HAS to apply to professional intermediaries, as ‘lenders’ can only refer to their own product ranges? What are they suggesting, direct sales is just as good as independent advice & processing??

    • Daniel K 17th May 2016 at 5:15 pm

      I work I the ‘direct’ space, and I would go broker route every time if I was a customer


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