The FSA is proposing to ban most non-advised sales where there is a “spoken or other interactive dialogue” between a customer and a firm.
Under new proposals published today, all advisers must consider if a mortgage product is suitable and affordable for the customer, rather than simply providing information. The FSA defines interactive dialogue as face-to-face, telephone, social media or online propositions that contain the facility for live chats.
However, after a borrower has received advice, they can reject it and agree a product on an execution-only basis. The ban will not affect high-net worth borrowers who can continue to be exempt from advice.
Around 30 per cent of mortgage sales are currently non-advised, according to the regulator.
Equity release, right-to-buy and sale and rent-back sales must also be sold on an advised basis. However, sale and rent-back transactions are not liable for the opt-out after receiving advice, as the FSA says these people tend to be in a vulnerable financial position.
The FSA says it will publish its feedback statement and final rules next summer but will not implement the rules before the summer of 2013.
In November 2010’s distribution and disclosure MMR consultation paper, the FSA backed away from moving to an all-advised market, proposing instead to strengthen the sales standards in non-advised sales by making sure advisers made certain efforts to check if a product was suitable for a borrower. However, the FSA has now returned to its original plans to ban non-advised sales.
Association of Mortgage Intermediaries director Rob Sinclair says: “I think the recognition that for such complex transactions that advice is the right way to go is a positive step forward.”