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MMR: No need to charge fee if using independent label

The Financial Services Authority is proposing that a firm can still call itself independent if it does not charge a fee.

The FSA proposes to apply the independent and restricted labels to all firms in the mortgage mark

In its consultation paper today it says the concept of independence already exists within MCOB.

As part of this a firm cannot hold itself out as independent unless it enables the consumer to pay a fee for its services, rather than rely upon commission.

It says: “We considered whether we should retain this requirement as part of our new labelling landscape.

“As discussed in the discussion paper, we have not seen significant evidence of commission-bias in the mortgage market.

“Even if there were risks of commission bias, our enhanced sales standards will ensure that a firm only puts forward products on the basis of a consumer’s needs and circumstances.

“Our re-focused disclosure requirements will also require firms to highlight their remuneration including whether they get commission.

“Therefore we do not believe that there is a strong case for retaining the requirement for a fee option in our new independent label.”

Consistent with the approach in the retail investment market, firms who label themselves as independent will have to source products from a ‘comprehensive and fair analysis of the relevant market’.

It says: “We are conscious that in the mortgage market, there are a number of products that cannot be accessed by all firms, or products only available through special deals between particular lenders and intermediaries.

“We propose to specify that a firm’s search does not need to extend to these products in order to use the label ‘independent’.

“In practice, as currently, a firm may use a panel of lenders in meeting the requirement for a comprehensive and fair analysis of the market, but the panel would need to be sufficiently large to ensure it is representative of the range of products available.”

To be independent firms will also be required to offer an unbiased and unrestricted service. This means they should not be bound by any form of agreement with a lender that restricts the service they can provide.

Where a firm does not meet these requirements, it must describe its service as restricted. In doing so, it will need to clarify whether it offers products from just one firm or a limited number of firms, and note any restrictions on the range available.

It also says it does not see any merit in moving to an  all-advised market.

It says: “The more proportionate approach is to retain the existing distinction but to apply the same basic sales standards across both advised and non-advised sales.

“From the consumer’s perspective the important outcome is that, so far as possible, they buy a product that is affordable and appropriate for their needs and circumstances. However, firms will be able to continue to differentiate themselves by choosing whether to make a personal recommendation.”


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  • dave 16th November 2010 at 4:38 pm

    The FSA really don’t want to upset their friends at the big banks, do they?

    Well, many of them started their lives at these institutions and when the FSA finally disappears, no doubt many of them will hope to get their old jobs back.

    All face-to-face sales should be on an advised basis. That way, the banks will have to stand by their biased recommendations and pay the consequences. Clients who go into a high street branch expect and believe they are getting advice, regardless of what it says on a useless piece of paper – they do not realsise they are being sold products that only suit the bank – not them.

    Until the FSA address this issue, we cannot have any faith in them whatsoever.

  • Bob BUll 16th November 2010 at 3:28 pm

    I agree that much, alright most, of what the FSA requires of me as a sole trader is irrelevant to the way I do business. I often wonder why a broker operating from a 9’X 8′ office arranging a small number of mortgages each year and with a turnover often less than £15,000 per annum needs a regulator whose head is paid four times what the Prime Minister earns!

    While most of the ‘rank and file’ people I have had cause to speak to have been friendly and helpful, it seems that the hierachy is over paid, and have little grasp of what is really required to regulate the vast majority of ‘us’.

  • vp73 16th November 2010 at 2:17 pm

    The IDD was another ill-thought idea, but then our regulator is becoming better by the day at this. How can there be 2 different levels of being independent? A network or mortgage club advisor who is tied to certain lenders surely should never have been called indepedent, that just adds to consumer confusion and mis-selling. I would imagine the creators of the IDD have had huge promotions and pay rises since their launch.

    When will the FSA actually speak to the people doing the job day in day out to get a real idea of what consumers need and want, surely this is the most sensible cause of action to create a cost effective and clear solution for the good of everyone. We are not crooks like the FSA perceive us to be. We are profeesional people carrying out a much needed service.

    If the MMR does what we expect it to and drives the independent market down, I will leave the industry immediately along with many of my colleagues which will leave the banks to clean up. Consumers do not get advice from banks, they get sold a product to suit the advisors bonus, fact. Also, direct sales do not work that well unless the consumer is very savvy as many of the lenders staff are far from adequately trained to carry out their roles.

    Please find me email address below. I am happy to discuss my concerns and opinions with the FSa at anytime, in fact I would welcome it. This industry is run as a dictatorship. The FSA says jump and we have to say how high otherwise we are banned. Open and honest discussion is what is needed in a democracy.