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Are low mortgage advice qualification requirements putting customers at risk?

As the mortgage industry prepares to introduce tougher rules under the senior managers regime, the debate has turned to whether it is right for brokers to be subject to lower qualification standards than financial advisers.

Banks and building societies are readying themselves for the new regime, which comes into force in March, and have successfully lobbied the Treasury to extend the rules to cover all regulated firms by 2018. Lenders argued the Government was in danger of creating a “two-tier system” for mortgage advice if it failed to include the broker market in the regime.

Under the changes, firms will be responsible for ensuring all staff are fit and proper, rather than the FCA being responsible. This check will be done on their initial appointment and followed up annually.

The aim is to make it easier for the regulator to hold management to account in the event of failings.

In light of the changes and with the continued focus on improving adviser standards, some have suggested it is time to raise mortgage brokers up to the same minimum qualification levels as regulated advisers.

Since the RDR, advisers have been required to study up to QCF level four, which is roughly equivalent to the first year of a university degree. However, mortgage advisers are only required to attain CeMap level three, equivalent to A-level.

Prolific Mortgage Finance managing director Lea Karasavvas says: “There should be a requirement for higher qualifications in the industry. You cannot have a two-tier system where banks have one set of standards and intermediaries have another.

“Brokers are advising on the biggest financial investment of people’s lifetime, and in order to do this, the calibre of the people giving that advice should be exceptionally high. One mistake in that advice could have huge financial ramifications.

“To think that in this industry right now you could know nothing about a mortgage, sit a six-week crash course and then be a fully competent adviser at the end of it. This discredits the industry and the profession. Industry knowledge is fundamental and such courses should be abolished.

“There should be more detail in the training, more structure in the qualification process and higher standards should be set as there are still brokers out there that, quite frankly, should not be advising unsupervised. Having crammed the revision to get through the exam, it is concerning that someone who could potentially not retain what they had learnt to get qualified is then able  to advise.”

Others see the driver to higher education standards as an inevitability. Middleton Finance principal Daniel Bailey says: “It is only a matter of time before we see more qualifications required for mortgage brokers. If it improves the consumer’s perception of us as mortgage brokers and raises the standard of advice then it can only be a good thing.”

Some firms have already embarked on the journey to differentiate their advisers by encouraging them to attain higher credentials.

Chadney Bulgin mortgage partner Jonathan Clark says: “As a firm operating in both mortgage and wealth management areas of business, we chose to become chartered, even before a level four qualification became mandatory for wealth advisers. The clear outcome of this for us has been a higher level of better quality business as clients actively sought out firms with chartered status. We then encouraged our mortgage advisers and mortgage paraplanners to achieve level four status by taking the DipMAP qualification. We ran study groups and met the cost of their exams, hoping to mirror the success achieved in the wealth business.”

But Clark is cautious about suggesting level four should be set as a new minimum for all mortgage advisers.

“There is already a shortage of advisers in the industry. Any compulsory qualification requirements would need to be managed very carefully so as not to put off any new entrants as this could ultimately impact on a customer’s ability to obtain proper advice.”

Technology and Technical managing director Kim North argues mortgage contracts are much simpler than many products sold by IFAs and therefore brokers should not have to attain level four. But she says: “With the pension freedoms, demand for equity release is going to be greater than ever before so I think there should be higher qualifications for this area, but not for standard mortgages.”

Association of Mortgage Intermediaries chief executive Robert Sinclair welcomes the expansion of the senior managers regime to cover the wider mortgage market. But he does not believe that consumers will be better served if the qualification bar for brokers is raised.

“We are waiting for the FCA to identify resources to undertake a review of the syllabus and learning outcomes for the benchmark mortgage qualification. This is required as it does not currently adequately address second charge, bridging and remortgage,” he says.

But he argues: “We consider that level three is the correct competence level for this market. There are already level four qualifications for those who wish to demonstrate a higher standard. However, to push the base qualification to that level means including matters such as funding, capital and portfolio risk. This is not core to competent individual advice, so we are not keen to see this escalation in a market which is working well for consumers. It would risk diverting advisers into a costly exercise to requalify.”



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There are 7 comments at the moment, we would love to hear your opinion too.

  1. How about training FCA and FOS staff up to at least level 3 first?

  2. Sounds like the CII has someone writing articles for Money Marketing. Why on earth does a protection, GI and mortgage adviser need a level 4 qualification?

  3. I can not agree with Paul more. What a Joke this industry is becoming. If we was allowed to spend more time dealing with the clients needs Wants and Wishes rather than completing exams that once completed seem to have very little relevence to the day to day job we undertake the clients would be far better off!!!!

  4. Of course everyone in this market should be qualified to the highest possible level. Only a philistine would think otherwise surely! Maybe Phd level. Dr Mortgage sounds great. I haven’t checked to see if that’s copywrite yet or not. Damn! Not to worry that in 98.95% of cases the extra knowledge will serve exactly no purpose at all. Think of all the benefits. Far fewer advisers out there (don’t worry about the advice gap everyone). Loads of money and less competition. The business model that many of us have been waiting for. You know it makes sense. It worked brilliantly with the RDR didn’t it? It’s not like the Banks have ever miss-sold on an industrial level or anything. Of course as they say there should be a level playing field between us all. Yep I can see someone ending up with a knighthood on the back of this. It happened last time I recall. Oh of course I forgot, past performance is no guarantee of the future and regulation only ratchets up (both in complexity and cost) and you may have access to fewer advisers in the future than when you started. Thank you and good night.

  5. It isn’t lack of qualifications that put clients at risk, but the attitude of advisers. There is an important word missing from most lexicons – NO. If the client can’t really afford it then he/she should be told so. What is affordable? Far to much leeway is given.

    The impetus is to try and obtain the loan at all costs rather than ensuring that the finances are truly robust.

    Unfortunately all to often it isn’t advice as the lender pays proc. fees – otherwise known as commission and if there is life cover that too pays commission.

    All this should be stopped and a fee should be charged. Payable whether or not the client proceeds – after all that’s advice – not transactional commission.

    As to qualifications I have seen far too many really well qualified people provide what I call flaky advice. Pushing the clients into things they never knew they wanted or needed. Qualifications with the right attitude (work first foremost and only for the client, in the most cost effective way possible) is the correct aspiration.

  6. That’s a bad article written by someone who does not understand mortgages. After all it wasn’t so long ago you walked into a bank and the advisor had no qualification. Secondly mortgage advisors handle far more mortgage enquires and understanding the lenders and strict criteria is experience which an IFA cannot commit to knowing if he or she is dealing with wealth management. You cannot have everything … Just because your industry is under the spotlight don’t look elsewhere and point the finger! Poor article

  7. Rt Hon Sir Arthur Streeb-Greebling 23rd November 2015 at 10:32 am

    It is quite outrageous that someone who has not attended Oxbridge and has published at least 3 years post-graduate theses on this subject should be allowed to practise mortgage broking; or be aged 17, named Tracy and work for the Nationwide Builing Society.

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