The Financial Services Authority has called on mortgage advisers to improve their processes, after discovering that just one third of firms had robust processes to provide customers with suitable advice.
The regulator says it found scope for improvement in all aspect of the advice process, after reviewing over 250 firms of various sizes which offered mortgage advice.
These improvements include assessment of customer needs, including affordability; training and competence; overall systems and controls; and record keeping.
The FSA reviewed the firms after undertaking mystery shopping, visits and questionnaires between June and October last year, in order to establish a baseline of the process by which advice is delivered to the industry.
Clive Briault, managing director of retail markets at the FSA, says: We found significant failings in the advice giving processes in a number of mortgage firms. Poor processes increase the risk of unsuitable advice being given.
It is essential that firms have robust processes in place, so that they treat their customers fairly and provide suitable advice.
The FSA says that the smaller firms it assessed needed to implement systems and be able to show the use of them. Larger firms, its says, generally have robust processes in place, but could not always demonstrate they are using them.
The regularot produced good and poor practice guides along with providing key actions to fims that were visited.
It says the failings were significant in a number of firms and it has referred several to enforcement.