The debate over advised and non-advised sales rumbled on last week as the major trade bodies responded to the Financial Services Authority’s latest Mortgage Market Review paper on distribution, published in November.
In its feedback, the Association of Mortgage Intermediaries has called for compulsory advice for some ’at risk’ groups such as first-time buyers, the credit impaired and those borrowing into retirement.
Unsurprisingly, the Council of Mortgage Lenders is keen to maintain a non-advised route. But the current system remains complicated for consumers. Many use branches and mistakenly believe they’ve received advice, when they’ve merely received a sales pitch. There’s nothing wrong with a sales pitch, providing it’s clear to consumers that’s what it is, but this is patently not the case at the moment.
Without doubt, some form of compulsion seems a logical way to go, especially for vulnerable groups. Similarly, AMI is right to be concerned regarding a future Retail Distribution Review-style structure via the European Commission. Branch advice is not free – it’s a significant fixed cost to lenders. That’s why we’ve had such a furore over dual pricing, as lenders have attempted to ensure their branch advisers are busy and productive.
Any situation where a consumer is not aware of the additional benefits and protections provided by advice, only the additional cost whacked on to their bill when they get their mortgage, could potentially be a significant disadvantage to brokers.
Yes, brokers need to get better at extolling the virtues of their service but also, lenders should be transparent about what additional costs have been added to loans.