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MMR too focussed on brokers with lenders an afterthought, says BSA

The Building Societies Association has criticised the Mortgage Market Review’s stance on full advice as being too focused on brokers, with lenders an afterthought.

It warns that there could be a risk that consumers may become less engaged if they are forced to take advice even if they don’t require it and pay less attention and have less interest in the mortgage process on the assumption that they will be provided the best mortgage for their circumstances.

The trade body states: “This is a criticism we raised in our response to CP 10/28 and it is disappointing that this has not been taken on board. Of particular concern is the lack of regard for lenders with a limited product range, where advice would be inappropriate and impractical.”

“At a time when the government is implementing major reforms through the Universal Credit regime with the objective of putting consumers in control of their finances, this proposal seems to be at odds with the government’s policy.

It has also criticised the FSA’s stance on advice as too product focussed and risks further reducing choice for consumers.

The BSA was hoping that the FSA would mortgage advice and selling to move away from being solely focussed on recommending or providing information on a product, to a more holistic financial advice and information approach.

By moving to a fully advised market it says the FSA risks making the process of getting a mortgage more product focussed, further reducing the choice for the consumer as to how they manage their personal circumstances.

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  • Dave Wilkes 31st March 2012 at 6:05 pm

    I am appalled that the majority of new clients I question as to why they have their current mortgage product, whether it has been arranged through a bank, building society or independent adviser, reply ‘because it was what I was advised to have’, but further questioning reveals they have no comprehension or understanding as to why it was the most suitable product for their circumstances or aspirations.
    In relation to the article the BSA ‘has also criticised the FSA’s stance on advice as too product focussed and risks further reducing choice for consumers’. They seem to forget that it is their members, along with the banks, that offer the most limited choice of mortgage products to their direct customers, which arranged through their so called ‘advisers’ who operate behind the ‘we did not recommend’ get out clause. In their employed, target driven world, they will try and shoe horn the client into one of their products with, I would suggest, in many cases little or no regard for the considerations outlined above.
    Reading the comments to date, whilst I agree with Maurice Edgington that ‘mortgages are not investments’ and ‘mortgage customers need to know what their options and choices are not “take this mortgage because I have advised you to”’, I am not happy with implied suggestion that mortgage customers do not require skilled advice, unlike investment customers who could lose their money. Majority of mortgage customers see their monthly mortgage payments as their ‘investment’ into bricks & mortar, which will eventually allow them to own their own home. Bearing in mind that for most mortgage customers their monthly mortgage payments are one of their biggest monthly commitments, poor advice can not only lead to them losing the money they have ‘invested’ so far, sounds just like an investment to me, but could also lead to them losing the roof over their head, a risk not necessarily taken by investors unless they are unfortunate enough to have been caught up in recent investment scandals such as endowments.

    In summary it is about time the banks and building societies were made to assume full responsibility and accountability for the suitability of the mortgage product arranged directly with themselves, for each individual client, especially when, from my experience, the majority of customers leave the branch or the direct sales call centre with the mistaken impression that they have been ‘advised’.
    Secondly, I think it is about time that some IFA’s stop seeing mortgages as second class products, which therefore do not merit the same level of skilled advice and due diligence as investment products. I would even go as far as to say that some of the mortgage products in the current market are more complex than some investment products and the client deserves a full understanding of why the recommended product is most suited to them based on the aforementioned considerations.

  • David Greenaway 30th March 2012 at 3:16 pm

    Sorry, but this article doesn’t say anything about not giving advice, in fact it says the BSA wants more advice and wants intermediaries to give proper advice, not just about the mortgage. I’m all for that, surely you are too?? I agree that lenders shouldn’t be exempt from that, but as an IFA, I can sell my services as financial advice, surely if all brokers had to do this, this is better for consumers and clearly seperates us from the selling process in the banks.

  • Steve Wentworth 30th March 2012 at 2:19 pm

    The MMR has been written with the focus on consumer protection first and foremost, the cosumer is best protected when they receive advice for what is most likely to be the largest transaction in their personal lives. There is nothing within the MMR that will stop the consumer engaging with an adviser as to the direction/outcome of the advice in fact this is most likely encouraged under TCF. How dangerous would it be if the consumer seeked a non-advised sale (thinking they were receiving advice) and then switched off like this article states.

  • Nick 30th March 2012 at 2:14 pm

    Some sense at last, lenders have hidden behing wording such as – “we provide information only” to get away with any hard and/or proper advice which IMO 99% of consumers need!

  • After thought? 30th March 2012 at 2:07 pm

    I would say that brokers are the last reason for MMR, surely it is the borrower the legislation is all about with neither the broker or lender being favoured. Please tell me this is so.

  • Mike 30th March 2012 at 2:04 pm

    Ok BSA, you see that you may have to consider the client first rather than the profit centre. In what is likely to be the largest purchase in a persons lifetime, you actually think they need no advice? I have seen lenders offering expensive personal loans (with PPI) instead if a cheap, simple further advance and offering more expensive ‘offset’ mortgages when clients have nothing to offset instead of the cheaper deals, all just to meet targets. FSA be warned, change your stance on this and be prepared for another ‘miss sold’ debacle!!!

  • Stuart Duncan 30th March 2012 at 1:42 pm

    As stated in response to the other barrel of this broadside (from the CML, suspiciously coincidental in timing):

    “Well, does that not say several things aboiut the world as it stands today and may appear in the future?

    A client taking on a new mortgage product has a right to an advice option. Is that not what was intended by the original consultations surrounding mortgage regulation in 2004?

    Lenders claim/acknowledge that advised sales take significantly longer and threrefore cost money. Welcome to the real world!

    As for lenders who opt not to distribute through the open market and who wish to keep a cosy arrangement where they can churn out cheap loans by avoiding the responsibility that comes with providing advice, it is about time their smug attitude to the market was challenged and their ability to bribe the consumer away from independent comparison made more costly.

    I long for a properly-functioning market where the public are not penalised for seeking advice and support from their advisers. The pendulum has been allowed to swing far too far in the favour of non-advised sales due to FSA failure to impose even the basic requirements of their own rules and statutory objectives.

    There will no doubt be the odd anonymous objector to comments such as mine, but I have no doubt that these objections are profit-orientated with no true concern for the consumer.”

    As for smaller lenders, why is it an issue to outsource their advice process to intermediaries if they have competitive and fairly-priced products?

    We are there to assist lenders, as well as consumers, not to damage them!

  • Maurice Edgington 30th March 2012 at 1:42 pm

    Since when has the FSA listened or even consulted with consumers?
    Customers for mortgages do not see ‘advice’ in the same way as IFAs or the FSA. The FSA is intent on grouping mortgages in with investments, which, apart from general insurance, do require skilled advice because customers could lose their money. Mortgages are not investments but secured loans and therefore do not need invetment type advice. Mortgage customers need to know what their options and choices are not “take this mortgage because I have advised you to”.

  • J 007 30th March 2012 at 1:21 pm

    I can see why xcompanyman is an X. How dare you go around calling us Tin Pot, every client I see I am genuinely trying to give the full picture so a they can make a fully informed decision on ALL areas to consider. Most people I see have already seen a Bank directly and don’t even know the difference between a Valuation/ Homebuyers Survey, a Tracker/ Fixed Rate or potentail Solicitors Bills/ Stamp Duty to be paid. And MOST do not even get an IDD (which confirms that they can only offer their own rates, NO SURPRISE THERE THEN !) I THOUGHT THIS WAS AN FSA MINIMUM STANDARD. It is high time these BANK ADVISERS go back to Training School and learn the basics before they are allowed to wear THE UNIFORM with their BANK CREST on it ! COMMENT ALL

  • Dave 30th March 2012 at 1:15 pm

    This is the first time the FSA has listened properly to what brokers have been saying and done something that benefits clients rather than lenders.

    Put up or shut up, you’ve had too good for too long!

  • xcompanyman 30th March 2012 at 12:46 pm

    did anyone from BSA think that response through before sending it or did they just copy and paste it from an email from one of the major lenders?

    If tin pot IFA’s and mortgage brokers can offer full advice and stand by it then why cant lenders? answer…., because its too much like hard work, too much like cutting your margins, to much like ensuring the customer gets a good deal, too much like resposibility, too much like accountability, too much like honesty, simply put its too much for them.

    The current MMR proposals are some of the best ideas that have come from the FSA and will benefit all consumers and longer term will put the focus on products as well as the delivery, which is the one thing which has been missing from regulation for 25 years.

  • John Lacy 30th March 2012 at 12:24 pm

    No BSA I won’t buy in to this—you’re a trade body for LENDERS and they don’t want the expense and extra time needed to be taken to give advice (or the risk of them being sued for poor advice).
    Just pay up, train your staff properly and actually think of the customers for once.