View more on these topics

IFAs caught in the mortgage Cat trap

Intermediaries and lenders believe finalised plans for Cat-marked

mortgages have muddied the already murky waters surrounding the role that

IFAs will play in the benchmarked market.

Legal & General marketing manager housing market Richard Verdin says: “I

genuinely do not think that IFAs have differential earnings on their mind

when they are advising on a particular product over another but if

Cat-marked mortgages are not sold in large numbers, a trap will be set for

IFAs to get caught in.”

Savills Private Finance managing director Mark Chilton says: “How will

brokers provide best advice when they will not get paid for advice on one

product? The less reputable broker will skew advice away from Cats.”

Many lenders question whether the Government&#39s decision to encourage the

“execution-only” route for mortgages will help the FSA achieve its goal of

a financially empowered and aware public.

Some believe that it could lower the knowledge base of clients and confuse

the public into believing that Cats are Government-approved and the best

product regardless of other options.

Scottish Amicable national mortgage manager John Malone says: “It will be

a big issue for IFAs to get over to clients that the Treasury&#39s kitemark

does not necessarily mean it is the right product for every client.”

Verdin says: “We seemed to be heading down the fee route but the latest

news seems to be pushing against the wind. But with a bit of luck IFAs will

be able to prove their value.”

As the amount of time and admin it takes to advise a client on a mortgage

plus the admin has grown, IFAs are wondering if a procuration fee alone

will be a fair reward for their advice.

Mortgage Code Compliance Board chief executive Luke March says: “It is a

great disappointment. If lenders want Cats to succeed, they need to

increase the procurement fee. If brokers are trained well, they should be

well rewarded.”

To make matters worse, while payments to advisers are restricted, their

workload may increase, with every intermediary having to rewrite their

terms of business.

Malone says: “Section 165 of Consumer Credit Act says the maximum a client

can be charged is £5 if the case does not proceed within six months. IFAs

will need a sentence in their terms of business which is a caveat on

Cat-marked mortgages.”

A new set of uncertainties have been added to what is perhaps the most

uncertain sector of financial services.

Recommended

Tech funds plummet after massive Isa take

Aberdeen&#39s technology fund is claiming first prize in the Isa fund racedespite technology stocks going off the rails in recent weeks.The tech fund took £375m in the past 12 months, with more than £315m takenin the last three months alone. But no technology fund has escaped therecent volatility in the tech, media and telecoms sector.The […]

Blip in the biotech story

Schroder is kicking off the second Isa season by launching a globalhealthcare fund and analysts believe its timing could not be better.The healthcare sector has been driven by biotech stocks and valuationshave soared. But the jitters in technology stocks have caused biotechs toplunge and analysts expect this could open up a buying opportunity.Framlington sales & […]

Advisers urged to push waiver and life cover

IFAs are being urged to jump- start the pension market with a buy nowwhile stocks last campaign, pushing waiver of premium and life cover beforestakeholder restrictions apply.Providers believe IFAs can take advantage of the changes to boost theflagging personal pension market.From April 2001, life cover under pensions will be restricted to 10 percent of the […]

A blueprint for building on site

The range of issues confronting the 21st Century IFA is daunting.Stakeholder pen- sions are just a year away. Electronic commerce is herealready. Polarisation is an issue that never seems to go away. IFAsthemselves are asking if they can survive if their remuneration isdependent on the sale of a product.In line with that, IFAs are focusing […]

How do you choose the best online service?

By Ross Jackson, senior marketing manager There are many different protection online services available in the market and no doubt you’ll have used a few when submitting protection business. But why should you have to put up with slow, unresponsive sites for your business when you’re used to dealing with slick, modern user experiences in your […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment