We do not talk enough about the value of advice. At the height of the mortgage boom, a broker could tell a prospective borrower they did not need to go directly to the bank but could go through the broker and get a cheaper deal from the same bank. We did not need to talk about advice or service but got business because we were cheaper. Those days are long gone and in many cases, but fortunately not in all, broker products are now more expensive and we have to explain in other ways how we add value.
The Association of Mortgage Intermediaries has worked to establish the value of advice but I am surprised that we as an industry have not made more of this. It seems strange that the regulator has paid so little attention to the immense value real advice gives to borrowers and that banks are able to sell so many mortgages on a non-advised basis.
I fear that the number of borrowers unaware they did not receive advice is huge. I have no objection to non-advised sales where appropriate but no matter how great the value of advice, you should not force people to take it. Many people have a detailed knowledge of the financial world and forcing them to seek advice when they do not need it is a waste of everyone’s time and resources.
I have seen enough investment bankers, finance directors and accountants who know whether they want fixed or tracker, repayment or interest-only. These people should be able to opt out of advice if they choose to, however, many of them will probably want to receive the advice of an experienced professional broker.
Those wanting to opt out of advice should be able to sign a waiver that confirms their choice and shows they realise the implications of this act. However, there are some areas where advice should be mandatory, such as equity release, adverse credit and debt consolidation.
It will be interesting to see how the EU’s mortgage proposals pan out. It looks as though we are the only country where banks give advice, so the EU is planning to split up lending and advising by insisting that those giving advice need to be able to recommend a wide enough group of products.
If the bank adviser only has access to the bank’s products, they will not be able to give advice. I have worked as a branch adviser for a bank but having seen the whole market, I think it is difficult to give real advice if you do not have a full product range. If a borrower wants an offset mortgage but the bank you work for does not offer one, it is likely you will talk the borrower out of their first choice. The EU proposal would prevent this from happening.
It is unlikely that banks will want to operate independent brokers (Who wants to sell another lender’s products?) so this potentially could be the greatest win the UK broker market has ever seen. In my view, this will also count as a huge victory for consumers and ensure more of them receive advice.
Jonathan Cornell is head of communications at First Action Finance