The FCA’s refusal to ban commission in the mortgage market is “inconsistent”, according to life and pensions advisers.
The regulator confirmed this week that it had found little evidence of bias, and therefore ruled out a ban as part of its upcoming mortgage market reviews.
However, advisers already subject to a ban as part of the RDR have questioned the decision.
Advice and Wealth Management Solutions partner Clayton Cumming says: “You have got to ask if they are still happy for there to be the potential for commission bias within mortgages because at the end of the day that’s still giving financial advice.
“If there are businesses out there that pay different levels of commission then there will be questions of bias, and there should be grounds for a change to bring these businesses into line.”
Alpha Investment and Financial Planning director Alan Solomons adds: “You need a level playing field and if there’s commission, theoretically at least there is the opportunity of bias. So what is in the customer’s best interest? This does seem inconsistent.”
However, Association of Mortgage Intermediaries chair Pat Bunton hit back: “The life and pensions firms can say that, but their market saw RDR precisely because of huge discrepancies in the amounts of commission.
“Procuration fees in the mortgage world typically vary between 35 and 40 basis points. The sort of discrepancies that happened in their sector simply don’t exist.”
This really did makes me laugh, these are probably the same advisers, that kept very quiet, when we all realised, that under the FSCS new charging structure, all protection advisers are pushed into the same class of risk as SIPP & Pension advisers, subsequently paying for complaints against this sector. Never heard a word on how unjust this was!
Steve, you are spot on. Our mortgage market works very well and does not need to be fixed, so the FCA are quite rightly seeing this.
I think it’s inconsistent and naive to suggest otherwise. Whilst proc fees “typically vary” between 35-40 basis points, there are times when the discrepancy is far more pronounced. For example, a light adverse credit case might be placed with a “specialist” lender that pays a much higher proc fee, when it could be potentially placed with a small BS with flexible u/w who only pays a small proc fee. Also, we all know that large lenders try to influence distribution through networks by tweaking their proc fees upwards. If there is no commission bias, this strategy wouldn’t work.