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Tougher adviser rules sparked by fears over ‘two-tier’ advice market


Mortgage lenders lobbied the Treasury to extend tougher accountability rules to advisers over fears the regime would create a “two-tier system” for mortgage advice.

Banks and building societies are currently preparing for the introduction of the senior managers regime in March 2016.

In a shock move last month, the Treasury announced the regime would be extended to all regulated firms at some stage during 2018.

The regime passes responsibility for ensuring staff are fit and proper from the FCA to firms, and makes it easier for the regulator to hold senior managers to account in the event of failings.

It means customer-facing staff are no longer pre-approved by the FCA. Instead, any staff member who could pose a risk to customers must be certified as fit and proper by the firm initially and on an annual basis, and will be subject to new conduct rules.

Building Societies Association head of external affairs Hilary McVitty says: “We had raised some concerns, particularly in relation to mortgage advisers, where those working inside lenders would have been subject to the regime and those working for introducers and brokers would not.

“Clearly there would have been a risk of a two-tier advice system. Furthermore, mortgage advice staff at lenders may have chosen to leave and go to brokers or IFA firms where they could do the same role without being caught by the regime.”

British Bankers’ Association executive director Simon Hills says: “You cannot logically argue that one group of advisers should abide by a higher set of standards than another.

“When engaging with policy-makers, we made those level playing-field arguments.”

One regulatory consultant, who wishes to remain anonymous, says some building societies even considered scrapping their mortgage advice arms.

He says: “There were concerns there would be a flood of staff out of banks and building societies, particularly among mortgage advisers.

“For the smaller building societies, which can be smaller than large advice firms, there were concerns the regime was not proportionate. Smaller lenders even considered whether it would be sensible to continue to have a mortgage advice operation.”



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There is one comment at the moment, we would love to hear your opinion too.

  1. Clearly Hilary McVitty is worried that Banks and Building Societies face the same challenges as their introducing brokers and has little knowledge of the regulatory requirements of the brokers. What she has actually managed to highlight is that the senior manages don’t understand current regulation. The new rules will make her, the senior managers accountable and responsible, that is the issue. Welcome to our world, those in charge have to take responsibility, personally with no get out of jail free card. I would suggest the fear is yours, not your staffs. How you can say mortgage advisers would move to brokers confuses me, why would they do this. They are already responsible for their advice. No the fear as stated is you the senior managers will become personally responsible for their actions, you will no longer have your get out of jail for free card.

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