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EXPO 2010: FSA says brokers will still have minor role in checking affordability

The Financial Services Authority has revealed today that brokers will still have a role in checking affordability, but that it will be limited to checking how appropriate products are for clients.

Sheila Nicoll, director of conduct policy at the FSA, was speaking today at the Mortgage Business Expo in London.

She says: “Our view is that intermediaries do have a role to play in assessing affordability but that it should be limited to checking whether the consumer fits within the expected parameters of the lenders’ affordability criteria. After all, it is the lender who has access to customers credit history and who can request additional information if required.

“We know that in reality, intermediaries will be unable to make this assessment without obtaining information about what the customer can afford to pay, so we see little reason to risk blurring our clear line of responsibility by placing detailed affordability rules on intermediaries.

“Instead, we are considering removing these requirements, and replacing them with a high-level requirement which requires intermediaries to ensure a customer is eligible for the product and that it is appropriate for them.”

And she dismissed rumours that this would lead to brokers turning into nothing more than lead generators for lenders.

The FSA will remove its current requirements for brokers checking the affordability of products for clients and it will be replaced by eligibility and appropriateness tests.

All mortgage sellers, not just advisers, will also have to have an existing Level 3 mortgage qualification and not enhanced like it is for advisers under the Retail Distribution Review.

She says: “All sellers of mortgages will need to carry out an appropriateness test and will need a mortgage qualification.”

The FSA’s upcoming Mortgage Market Review paper on distribution and disclosure is set to be published imminently and rumours are rife within the industry that it could be out as soon as Tuesday November 16.

Brokers were also told that the regulator sees value in applying the independent and restrictive labels to advice.

Nicoll says: “We see a case for applying the independent and restrictive labels to the mortgage market. We recognise there are differences between mortgage and investment markets.

“For example the mortgage firm might use the labels to explain their position on direct deals.”

She also says that the FSA would be removing the Initial Disclosure Document but keeping the Key Facts Illustration. However it might insist that it’s given to consumers at a different point in the sales process.

She says: “The aim of the IDD was to provide consumers with information to help them to compare fees, charges and services provided by firms.

“Research has however shown that in practice, the IDD has had little impact on consumer behaviour.

“Further evidence has also shown that consumers do not use the KFI to shop around. They do however, value it as a record of their purchase and we have received strong support from both consumers and firms for retaining the KFI in its current form.

“So, while we do not propose to change the content of the KFI, we think that there may be value in removing some of the trigger points for the KFI to be provided to consumers. This should ensure maximum impact and avoid information overload.”





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  • Mr Broker from E1 12th November 2010 at 11:33 am

    What the fsa is proposing is that everyone in the mortgage process be it brokers or the so called advisers at branches will now need qualifications, as currently branch advisers sell mortgages to customers without giving any advice at all. This will mean all the lender advisers will need to up their game, become qualified like the rest of us, more cost for lenders…means lenders will most likely favour business from brokers. In house non advised advisers no more! Great!!

  • Russell Kelly 12th November 2010 at 10:15 am

    Shame on Mr Wilson and Mr Mason. Is it not slightly narrow minded to think that you are the only part of the mortgage process who are regulated and in any way involved with checking the clients? What about the lender? What about the poor person at the other end of the phone who talks you through the entire affordability process when you are trying to put an application through their website? Are they not heavily involved? Or what about your under paid administrator who generally chases all the business for you with each lender and then hears you complain when the lender decides not to lend because you have made a mess of your calculations.

    You are actually trying to imply that you are so heavily involved in the process, lenders should give you their entire affordability calculation (which of course would be pointless as you would never read it as you would have different policies for different lenders and would still revert to calling them to clarify) and every other member of the mortgage process should agree with your calculations on what the client can afford. Quite frankly I’m amazed both with your short sightedness and lack of understanding of such a simple subject matter.

    Package a case correctly first time and send it to a lender (this will involve a calculator), update your client on the progress of the application and agree up front when you will be able to contact them, discuss the outstanding documents with the lender and clarify exactly what they are trying to assess, up date the client and get the documentation if you don’t already have it. A simple process and if managed properly is quite profitable!!

    Let’s not all jump on the “Down with the FSA” witch hunt!

  • John Steed 12th November 2010 at 10:03 am

    We must ensure customers are ‘eligible and the product ‘appropriate’ for them. What does this nonsense mean? How do we assess the above two criterea without analysing affordability?
    Its going to be overkill and chaos just like M day 2004.

  • bobby 12th November 2010 at 9:46 am

    As Bill Paxton once said in Aliens

    ” game over Man game over ! “.

    Can the last Man or Woman to leave the industry please turn the lights out.

  • Bobby 12th November 2010 at 9:33 am

    I think the article should have read

    ” FSA says brokers will still have a minor role “.

    That just about sums it up perfectly.

  • Damien Brassneck 12th November 2010 at 9:22 am

    The final nail in the coffin of the almost defunct intermediary market. The next step of the FSA strategy of fewer, larger distributors offering less product choice making the market easier to police.

  • Richard Wilson 11th November 2010 at 6:58 pm


  • Richard Wilson 11th November 2010 at 6:56 pm

    Compliance as it is or even as it is sometimes misinterpreted and the real world. Perhaps these words should not be in the same sentence. Certainly the FSA, the Real World and Compliance within a set of rules or directives based on a common understanding of what is right and wrong or even logical, should never be associated in the same sentence. Oops!!!

  • Compliance Man 11th November 2010 at 5:55 pm

    The trouble with articles like this is they don’t give the full context!

    1) The IDD is to abolished in its current format although intermediaries will still have to give out key information about their fees etc but could choose to do this in a terms of business

    2) The KFI is recognised as useful but as a record of what they have done rather than to shop around and compare deals as it was originally envisaged. Therefore the likely potential for handing it out at a different time may well be post sale rather than pre application.

    Actually, the proposals in this light are not that bad although it will mean change.

    Also she said they believe all non-advice sales will require an appropriateness test as well so all those selling on a non-advised basis will require a qualification, which will include all lender staff who sell direct to the customer.

  • Ian Mason 11th November 2010 at 5:38 pm

    are they in the real world? who else but a broker fills in a fact find discusses
    affordability and fills out an income expenditure sheet and ties that in with income from payslips and and looks at creditd card debt and other loans. THe lender just does a credit check and runs on that. we certify ID and payslips so how aewe not involved in the process. Do the FSA live in this world or in space because they really need a reality check

  • Andy Valvona 11th November 2010 at 5:23 pm

    What about the non-adviced telephone sellers most of the banks have?

    What about them?

    Of course they will have to qualify – when has anyone suggested they won’t have to?

  • Dave 11th November 2010 at 5:22 pm

    How will advisers be able to check if the client meets the lenders criteria unless the FSA forces lenders to reveal their affordability criteria – they won’t like that!!

    The IDD was poorly thought out and does not fit the purpose – oh, that sounds like a definition of the FSA itself.

  • Richard Wilson 11th November 2010 at 5:02 pm

    Clap trap, drivel and utter ineptitude. Do we really pay this woman for this absolutely misguided concept of what is required in our industry. As independent financial advisers it is our job to give clients ‘Best Advice’ and that includes establishing whether a product is affordable.

    How can we have a minor role?

    Our role should be ‘KEY’ to the whole process.

    I despair, but somehow feel that is a waste of time and effort.

  • Rudolph Hucker 11th November 2010 at 4:48 pm

    FSA says “Give the KFI out after exchange of contracts”

    Don’t laugh!!
    It could happen.y

  • Steve Wentworth 11th November 2010 at 4:41 pm

    Abolish the IDD

    but we still need to inform clients whether we are Independent, restrictive or tied. How will we prove we’ve done this???

    and keep the KFI. However, the KFI may be disclosed at a different point in the sales cycle?

    What other point in the sales process, you make a recommendation, you provide an illustration to justify it? Is she expecting us to hand out the KFI before we’ve even fact finded?

    Words fail me!!!

  • John Baker 11th November 2010 at 4:23 pm

    What about the non-adviced telephone sellers most of the banks have? Do they now have to qualify (That’ll be fun!!)? I can’t see it as the cost / time would be prohibitive…..imagine the screams from Canary Wharf

  • colin 11th November 2010 at 4:19 pm

    is it just me or is change for change sake to try and justify their existence and jobs….i thought their remit was to make things easier for the man on the street to obtain advice etc etc……instead we embark on some half cocked MMR, installing draconian ideas from an ivory tower.

  • William Reid 11th November 2010 at 4:10 pm

    Abolish the IDD and keep the KFI. However, the KFI may be disclosed at a different point in the sales cycle? That’s how I read it.

    What difference will that make? Isn’t it just a shuffling of the cards so to speak, and in doing so, try to keep the regulatory staff in jobs?

    They need to be on the street doing the job, not just guessing it!

  • John A. Douglass 11th November 2010 at 4:04 pm

    Are we to assume that Mortgage Brokers are going to have the same qualification as Ms. Sheila Nicoll and her co directors and visa-a-versa or are we to continue having the blind leading the sighted?

  • Jonathan 11th November 2010 at 4:02 pm

    It just sickens me to read what this Sheila Nicholl pontificates about. I really cannot understand how they are getting away with this while everyone stands idly by.

  • ajk 11th November 2010 at 4:02 pm

    What a load of tosh from the Farcical Services Authority
    get rid of IDD – appropriateness test give a free biscuit with a KFI why not
    They really are clueless arent they