FSA to scrap ‘whole of market’ mortgage label

Readers' comments (10)

• Phil Castle | 19 Oct 2009 2:57 pm

  Stuart Duncan and I both got in to a heated email debate with Lesley Titcombe of the FSA on this issue when dual pricing first staretd and what i want to know is why it has taken them 2 years to come round to our way of thinking....

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• Phil Castle | 19 Oct 2009 3:03 pm

  -----Original Message-----
  From: Phil Castle [mailto:phil.castle@fescape.co.uk]
  Sent: 13 May 2008 15:05
  To: Lesley Titcomb
  Subject: DUAL-PRICING CAMPAIGN - We need your help
  
  
  Sarah, Hector and Lesley, 12.5.08
  
  
  
  If you don’t read and respond in open forum to the open letter from Stuart Duncan (let me know if you haven’t got a copy and I’ll email you one), you will not be doing your jobs properly.
  
  
  
  I check the FSA website and Moneymadeclear daily for your notices and publications and all I and the public see is that you are pursuing certain individuals whose practices could be seen to be dodgy (well done). You are however visible failing to take proportionate action where TCF is concerned with apparent lender collusion and not recognising that not making KFI’s available to clients dealing with a fee based adviser is CLEARLY NOT TCF.
  
  
  
  Do you want all advisers to have to point out to you where these outcomes ARE NOT being met at present and you failure to recognise it will mean the vast majority of advisers will believe you have failed in statutory requirements.
  
  · Outcome 1 - consumers can be confident that they are dealing with firms where TCF is central to the corporate culture.
  
  · Outcome 2 - products and services are designed to meet the needs of identified consumer groups and targeted accordingly.
  
  · Outcome 3 - consumers are provided with clear information and kept appropriately informed before, during and after the point of sale.
  
  · Outcome 4 - where consumers receive advice, it is suitable and takes account of their circumstances.
  
  · Outcome 5 - consumers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect.
  
  · Outcome 6 - there are no unreasonable post-sale barriers imposed by firms when consumers want to change product, switch provider, submit a claim or make a complaint.
  
  We are doing as you required as to and ”actively measuring and responding to information on the outcomes it achieves for customers.” Mortgage brokers are NOT in a position in the current market to Treat their Client’s fairly due to the rule on KFI’s alone. Your failure to react to the effects of the change of market to identify a solution to this rule (and I know it’s never been made an issue before, but that has always been because there it used to be possible to submit via a lender directly WITHOUT commission up to a few years ago as KFIs were not prescribed in a set format! The market has changed, we have responded and told you where the anomaly lies and why it has come about and that a solution is needed IN OPEN forum, you can’t discuss this behind clsoed doors, discuss it now or NOT AT ALL
  
  
  
  Having discussions behind closed doors about issues with AMI, PFS, AIFA and any other body is NOT the answer unless you intend making membership of a “Professional Body” compulsory which I disagree with and resigned membership the moment compulsion was mentioned. As a directly authorised firm, I will continue to direct my questions at the FSA in open forum unlike the Networks and supposed industry representatives who prefer to lobby behind closed doors.
  
  
  
  A lot IFA’s are pointing this out to you on behalf of their Mortgage broker colleagues so you can see WE do not have an ulterior motive other than looking after OUR clients best interests whether they deal with us (we are authorised to provide mortgage advice, but do not target it or particularly want to do them!), a mortgage broker or deal direct with lenders.
  
  
  
  The KFI is the sticking point for genuine honest advisers who want to give TRUE Independent Whole of Market advice and don’t care whether it is Fee based or commission is paid as it is immaterial! That was why I took Lesley to task over the KFI issue, NOT the dual pricing which we don’t like is still a legitimate business decision (providing a cartel or collusion has not taken place as I would expect the OFT are now looking in to)
  
  
  
  
  
  Kind regards
  
  Phil Castle
  
  Dear Mr Castle
  
  Thank you for your further e.mails earlier this week and the comments from your fellow intermediaries. I will respond to you separately on the points in your most recent e.mail received today. I can also assure you that Hector Sants is writing separately in response to Mr Duncan.
  
  Thank you also for your recognition that we have taken action against firms and individuals who have not met the appropriate standards in certain areas, which you have picked up from our website.
  
  Your key concerns that I want to address here are that the FSA is preventing mortgage advisers who are genuinely trying to offer a whole of market service from recommending direct products to their customers where these may be suitable and that the lenders are contributing to the difficulty because they are not making KFIs available for the products that they are offering direct. Let me try and clarify our position for you.
  
  Market conditions are changing very rapidly. In such circumstances, we think the crucial point is ensuring that consumers are made very clear about the service being provided. So for example, if a customer goes to a whole of market intermediary, and the intermediary recognizes that, in current market conditions, there may be more competitive products in the market other than those available to the intermediary, that may be of interest to the customer, we think that there must at least be acknowledgement of this. We think that in such cases the intermediary should clarify to their customer that, while they are not tied to a particular set of providers, there are certain deals only available direct from lenders; and that if they want to investigate that sector of the market for themselves they may find more competitive products - but we don't expect the intermediary to point to a specific product or provider, and we would have no difficulty in the intermediary drawing attention to different levels of service. We do not think this an overly onerous disclosure; and indeed believe that intermediaries would want to make such a disclosure, in a positive and pre-emptive way - they run the risk of complaints and damage to their reputation if the customer subsequently discovers a better deal on the high street.
  However, as you, and those other firms' comments you have sent to us have indicated, some intermediaries have already taken account of this, and would like to be able to go further and make recommendations on products that are not available to them, but that the requirement to provide the customer with a KFI has prevented them from doing so because most sourcing systems do not have details of direct products. We have been made aware that there are certain sourcing systems operating in the market which can offer this service to intermediaries, at a fee. We have not done any work to assess the quality of their product and would not wish to endorse any particular one, but we understand that they are reasonably widely known across the broking community. For the longer term, you may also wish to consider requesting your existing sourcing system provoider to introduce such a service.
  
  On a related topic - the content of the KFI - we have also been asked for our view on the fact that any broker fee charged for the advice will not be included in the lender's KFI or offer documentation (because it is a direct KFI). Our view is that, in such a scenario, the adviser fee would not need to be included in the lender KFI/offer. What the lender is illustrating is the cost the customer needs to pay in order to obtain the credit on offer. The advice fee is not part of that. It so happens that the customer has paid that fee as part of their route to the product, but it is not a necessary condition for the credit. Therefore, the adviser fee does not need to be included in the APR or section 8 of the KFI produced by the lender.
  
  In these circumstances the customer is going to be receiving two KFIs : one from the adviser and one from the lender. As well as showing differences in fees, there may also be a difference in section 2, as the lender may be selling the product on a non-advised basis. These differences are in line with the rules, and will accurately reflect the different parts being played by the two firms in the transaction. However, the potential exists for some confusion on the customer's part, and the adviser may be able to manage this by explaining the different roles the firms are playing and the resulting differences in the disclosures they will provide. Also, it is perhaps worth reiterating that the adviser is fully responsible for ensuring their KFI is accurate (within the given tolerances).
  
  I recognise that your principle concern at present is access to the lender KFIs, but I hope you will find the additional information helpful.
  
  You have also pointed out that we do not have material on these issues on our website at the moment. We are working to rectify this and relevant material will be added soon.
  
  Yours sincerely
  
  Lesley Titcomb
  
  Lesley Titcomb
  Director, Small Firms and Contact and Sector Leader for Retail Intermediaries and Mortgages
  020 7066 0828
  lesley.titcomb@fsa.gov.uk

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• Anonymous | 19 Oct 2009 3:30 pm

  Amazing so what we are saying is we are going back to the original format of two types of adviser. what are we paying for the recycling of old ideas. re arrange this phrase joke a what!!!

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• Stuart Duncan | 19 Oct 2009 4:02 pm

  I did not realise how silly the original response was from Lesley Titcombe i.e. "Use a third-party KFI provider, but you are still responsible for KFI accuracy even though lenders will not provide you with one".....!!!
  
  I still think the whole idea is too woolly for the consumer to grasp and just removes the "Single provider" tag. I am unsure if it is not a step backwards, particularly when there are products still hidden from view.
  
  I went on a comparison site with a client the other day and it was completely misleading. You had to be pretty expert to understand what was what.
  
  Is it me, or is regulation a mess when it comes to protecting the consumer?

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• phil h | 19 Oct 2009 4:26 pm

  it must be me!
  
  i was under the impression that the good old (clear) definitions of mortgage adviser under The Mortgage Code were replaced by The FSA as they deemed that the term 'Independent' and words such as 'impartial', 'without bias' were too technical a term for the general public to understand, and as such 'whole of market' was supposedly clearer??
  
  it is much to my long-standing clients amusement that i have to alter my explanation of who i am each time i see them for a review of their mortgage!
  
  it is of my personal opinion that the issue is not neccessarily foremost at the 'whole of market' level as clients who chose an IFA or Independent Mortgage Broker do so for a reason - the area to concentrate on is surely that which covers the more 'vulnerable' - no, not the elderly, the Bank Customers !!
  
  
  By removing the term 'Hello i work for the bank, and am paid by the bank for making this sale to you even though the 'advise' you receive will not technically be advice at all and will be completely and utterley biased toward whatever is best for the bank' and replacing it with 'limited panel' is surely not in customer best interests - do the banks get a pass on specifying exactly what 'limited' means?
  
  I think that the fat bloke from the Nationwide ads must work at the FSA - perhaps along with the guy that writes the Natwest 'impartial' advertisements.

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• Richard Russell | 19 Oct 2009 4:49 pm

  Tell the policy makers at the FSA - "yes Prime Minister" was a joke, not a training programme.

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• Evan Owen | 19 Oct 2009 5:18 pm

  I thought the word 'independent' had been erased from the FSA website in early 2006, or was it 2005?
  
  Anyway, recycling is apparently very good practice and we need more of it, things like polarisation worked well for consumers and IFAs but less well for banks and DSF teams so out it went, the new idea was called 'depolarisation' so what is the recycled version called? Repolarisation? No wonder firms are dizzy rascals!!

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• Anonymous | 19 Oct 2009 6:19 pm

  Yet another display by the FSA of lets confuse the consumer, first we had independent, then independent that actually didnt mean independent etc etc etc. The poor consumer has more smoke and mirrors than a magicians act.
  Why not just have tied ie single lender, or independent meaning everything. Then the consumer has a hope of understanding and its easy to explain. I'm all for 'consumer protection' but not 'consumer confusion'.

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• Michael White CEO Emailmortgages | 19 Oct 2009 6:32 pm

  The following is an extract from comments I made in an article back in June.
  
  "If we turn specifically to the industry regulator, let us not forget people who sit in ‘recession risk-free jobs’, many with limited commercial experience of the industry which they are charged to supervise, tend to take an extremely conservative view of risk. Certainly, no one has ever been fired in the FSA; it would seem, for taking too cautious a view of such matters.
  
  
  By way of a reminder, the FSA has set out its aims under three broad headings:
  
  i) Promoting efficient orderly and fair markets;
  ii) Helping retail consumers achieve a fair deal; and
  iii) Improving its business capability and effectiveness
  
  I am not sure if it is just me, but I would question whether any of these aims have yet been met in an entirely satisfactory fashion?"
  
  Of course, I am not suggesting the FSA is all bad, just back this time last year the CEO Hector Sants, admitted that the agency could have done more to prevent the collapse of Northern Rock and to avoid other financial disasters.........enough said.

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• Jim Payne | 19 Oct 2009 7:18 pm

  Re-introducing 'Independent' as in 'Independent Mortgage Adviser' is clear, understandable and sensible for the consumer.
  The 'Restricted' category will require additional explanation along the lines that access is only being given to the products of selected lenders.
  Where does this leave the staff of individual lenders? Their 'Advisers' are clearly not 'Independent' and neither do they come in the 'Restricted' category, having no access to a 'limited panel' of lenders.
  So that there is no possibility of fudging the issue the FSA will need a third category. I suggest 'Company Representative' with the explanation that this means the employee can only talk about and explain the Loans/Mortgages that his employer has to offer.
  Many years ago when working for a Life and Pensions company this was easily explained and clearly understood by my clients.
  Incidentally I also have an axe to grind about the 6 TCF 'Consumer Outcomes'. Before they were introduced, I went to some trouble to research these on the FSA website looking at all their 'examples' of how they envisaged the concept working. As a result of this I then wrote a short paper to the FSA, quoting specific examples of where lenders (no names obviously) had seriously let down my clients and left me to pick up the pieces. My point was that the lenders were in effect getting away scott free while under the 6 'outcomes' I would appear to be at the very least open to possible complaints. I doubt there will be much surprise that the reply from the FSA, which just struggled to a second page, made no attempt to address any of the concerns or points I raised, merely one 'wishy-washy' sentence on taking an overall view of regulation. I was less than impressed as this was from the head of the team implementing TCF.

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