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Is offering clients just three lenders within the spirit of treating customers fairly?

There is no problem with restricted panels provided the range of products available to brokers is broad and competitive, say our experts

Limiting the choice of lender has nothing to do with treating customers fairly.

If that were the case, all lenders and brokers who work from a panel would be working against the spirit of the Financial Services Authority’s initiative, which I am pretty sure is not their intention. I can see how some would make the link, but to do so is to be overly simplistic and inaccurate.

Don’t get me wrong, I am no supporter of limiting choice of lenders. As long as you, as an intermediary, adopt the correct disclosure procedure with your client they will be able to make an informed decision about who they take advice from. This is what underpins statutory mortgage regulation.

It staggers me that we, as an industry, are surprised Pareto’s law prevails – that 80% of the business is done with 20% of the lenders. It was always the case and I’m sure it always will be.

Some may say that the mortgage industry is more likely to breed restrictive choice due to the limited variety available but equally, with most lenders at the bleeding edge vying for market share on rates it is not surprising there is a limited number able to fight it out at this altitude.

Simply by ensuring you extend your search criteria to include lenders you would not previously have considered is not TCF, it’s manipulation. And if you are engineering your results to demonstrate a varied lender mix, that’s the worst of all possible worlds.

Ultimately, the responsibility for the advice rests with you. If you are confident you have given the correct advice and it happens that 80% of your business goes to 20% of lenders, so be it. Have the courage of your convictions. As long as your research and audit trial are robust you have nothing to worry about. Taken on its own, offering a client a choice of three lenders is not a clear indication that the client is being treated unfairly. If this were so, the regulator would not allow lenders that only offer mortgages from their product range to operate and this would suggest the initiative is synonymous with independence and whole-market advice, which it is not.

Whether the use of only one lender or a limited number can be seen as treating customers fairly can be assessed through a range of products a strategy makes available to clients.

The FSA has not set hard and fast rules on treating customers fairly. The initiative is more intangible than this. It is a spirit, a set of principles to be diffused through the ranks of an organisation and become embedded in its culture, and evidenced in all of the firm’s processes which have an impact on their clients.

Any adviser who has experience of broking mortgages knows certain lenders will always be at the fore in ensuring their product ranges are consistently among the most competitive. It is no surprise that a large percentage of business is placed with a limited number of lenders.

If a firm offers a client a choice of mortgages from three lenders whose product ranges are not suitable for that client, this could indeed be deemed not treating the customer fairly.

But if the client is offered a choice of three lenders who consistently offer varied and competitive ranges of products, or even one lender who offers a varied and competitive range and can provide most types of clients with suitable solutions, quite clearly the firm is fulfilling its obligations under the FSA initiative.

In fact, maybe the TCF initiative will inspire more lenders to develop wider ranges of products.


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