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Label condition

Customers looking for help when considering a financial product are met with a bewildering array of offerings. This is not just because of the range of products available but individuals set on trying to help them acquire one.

Whether it is the “innocent” best buy table or price comparison website or the alphabet soup of adviser qualifications and job titles, the customer should be royally confused.

The retail distribution review has set out plans to introduce new labels for investment advisers, independent and restricted, with the residual direct offer as a refuge, until Europe catches up with us and makes this all but impossible. The discussion paper on the mortgage market review debates how this could be approached for mortgages and suggests changing the labels to independent (currently whole of market), restricted (now limited panel and single) and information only (non-advised). In this new world, information- only could still cover a lot of what is done in some bank branches and their call centres

While this has some resonance with the RDR, it is using similar labels but with different meanings. In the investment world, independent will mean that the adviser is reviewing all available products and providers within the scope of their offering and providing a fair market analysis. Under MMR, it will be enough to look at the range of products available to you. This need not include a lender’s products offered through its branches or the “specials” of a network or club, who they are not affiliated to. Additionally, I expect that there will be new lenders with limited capacity in the next few years, who will only distribute through a few partners. This will be to limit volume, not a concern over broker quality. Thus the independent term will not be what the customer might expect it to be.

But what does the customer expect from our market? A conversation that involves disclosing a lot of information, completing a lending application form and having an assessment of whether a mortgage is affordable before looking at products would, for most people, feel like they have been given advice. Customers might reasonably expect that those selling, as part of a regulated entity, were taking some responsibility for what they say and do – the products they introduce – as being appropriate and suitable. Indeed, for such a significant transaction, should the default position not be “advice”?

Follow this with the approach that any adviser has to tell the customer on what basis they assess the market – “I sell one company’s products”, “I have a limited panel of lenders I select from”, or, “I am independent and look at all the products that are available to me”. I think most customers would get this and we do not need labels to hide behind.

As a trade body looking from the dugout, this makes sense to me. But is it workable and practical? The ultimate question should be how to
make it clear to consumers about what is being offered.

Robert Sinclair is director of the Association of Mortgage Intermediaries

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