The FSA found significant failings in the advice-giving process, most notably in the assessment of customer needs, assessment of affordability, training and competence, system controls and record-keeping.
It found that failings differed according to company size. Smaller firms needed to implement proper processes and systems and larger firms, while they had such systems in place, could not always prove they were using them.
The failings were so severe in some firms that they were immediately entered into enforcement. Senior managers in all regulated firms must take heed. If they fail to take the FSA seriously their businesses are in jeopardy.
The dust has settled after Mortgage Day and the FSA can now take a clear look at what is going on in our market. Its number one objective is consumer protection and any firm that can’t prove it is treating customers fairly will be in the firing line.
Of course, the irony is that the vast majority of brokers and IFAs are giving customers good advice but unless they can prove it they are going to have problems.
There are clear parallels between the mortgage market and the life and pensions sector, and it is up to us to learn the lessons of the past. The endowment mis-selling scandal is a perfect example.
In the 1980s and early 1990s advisers believed endowments were a good vehicle for customers to use to repay their mortgages and millions of policies were sold. By the late 1990s the market had changed dramatically and endowments were no longer in favour.
Customers started to complain in their thousands so the FSA intervened and started to force firms to take action and prove the advice they had given was sound.
Most firms realised they did not have the processes in place to prove they had treated their customers fairly, the biggest failing being insufficient record-keeping. Millions of pounds were paid out in compensation and the industry’s reputation was tarnished.
Senior managers must take steps to ensure they comply with regulation and treat their customers fairly. They must step up to the plate and take responsibility for their businesses.
This FSA report proves that not enough is being done and that some firms have their heads firmly buried in the sand. If www.fsa.gov.uk is not registered on your computer as a favourite you are missing a trick.