The main issue is around the nature of advice, especially with the news that Tesco, yes Tesco that well known bastion of professional independent advice, aim to enter the mortgage market. The question to ask therefore, is should mortgages be put on the same shelf as the weekly vegetables?
Now this may be a touch unfair, as at present we do not exactly know how Tesco intends to distribute their product – I am more than happy to discuss this with them.
But while we live in hope rather than expectation that they will also use independent brokers to provide advice, it all raises the issue around the simple commoditisation of the biggest debt anyone is likely to take on in their life.
It is ironic that in perhaps every other walk of life, the internet generation takes advice.
Buy a new TV – compare internet reviews to see if the features meet your needs; book a hotel – jump on trip advisor and get advice on whether you will like the place by thousands of other people, to name but a couple of examples.
Even then, many walk into an electronics shop or travel agent and ask for advice to back up their own findings. However mortgages, apart from a vague price and basic features only comparison online, are more frequently offered without advice. What is even worse, is that many people who take out a mortgage without any advice do not even realise.
For the thousands of independent brokers who take pride in their work and can see firsthand how making a wrong choice can cost a lot of cash in the long-term this is incredibly frustrating.
So much so that many would say even if you do not do business with me, at least make sure you take independent advice somewhere.
For me, supermarkets and financial advice do not really mix unless it is done properly. I have no issue with a separate space in the supermarket where an advisor is on hand to work through the best Tesco product for that consumer and advise accordingly. Likewise for banks themselves.
I am not asking for banks to compare their products to other providers of course, but at least provide advice on which of their own products fit the customer’s circumstances best. It is just simple common sense rather than hiding behind the information only nonsense that many mistake for advice.
Quite simply the rule should be provide advice or don’t provide the product.
HSBC’s new split-rate product is a case in point. This is a good product and full marks to them for making it available with such competitive rates, but this is exactly the type of product that should be advised upon and I would guess that many will take this product and decide on a split without really looking at it scientifically.
It was interesting to see that one of the leading debt charities, the Consumer Credit Counselling Service, said last week that mortgages should only be given to first-time buyers “after study and an exam”. I have said for years that there should be more education, with school leavers at least having three or four compulsory lessons around debt, credit and personal finance in their final year as a starter.
While the Council of Mortgage Lenders, can say that there is a case for “strengthening general guidance on credit, so that potential buyers could equip themselves with the appropriate information”, the easiest way to solve part of the problem is to stop the practice of lenders giving out mortgages without advice. However, the CML then stated that “this raised questions on whether this was what consumers wanted”.
Sorry, but this is utter nonsense to suggest that consumers do not want more guidance on which mortgage is best for them.
Until the regulators take the brave, and correct decision, to level the playing field and insist that a mortgage can only be taken out once advice has been taken, whether from an independent broker, a bank branch or a Supermarket adviser, then we will still be open to issues.
For any incumbent government, whether one party or a mixture of several, this issue does ultimately need addressing.
We need education and advice, not pre-packed products available on the same shelf as vegetables.