Mortgage networks have hit back after the FCA raised concerns about a lack of quality control over advice.
The regulator’s post-MMR thematic review into advice and distribution found in 59 per cent of cases from lenders and brokers suitable advice was deemed to have been given, with just 3 per cent classed as unsuitable. The remaining 38 per cent were judged to be “unclear”.
However, the regulator has singled out networks for criticism. It says while lenders’ often structured advice processes leave “little or no flexibility” to apply judgement, networks’ lack of structure increases the risk of providing unsuitable advice.
The FCA says: “Appointed representatives of many large retail intermediary networks are delivering advice with little or no structure.
“This, coupled with limited oversight and controls in many of these networks, resulted in variable and inconsistent quality of advice and a higher propensity for unclear or unsuitable recommendations.
“Needs and circumstances were often assumed or missed. The quality of advice and recommendations depended on the skill, knowledge and approach of individual advisers, with mixed results arising from advisers adopting different approaches.”
Association of Mortgage Intermediaries chief executive Rob Sinclair says the concerns are overstated.
He says: “There are only 3 per cent of all cases where the FCA has found that advice is unsuitable, and we don’t know what sector they were in. That’s still more than anyone would like, but its not indicative of a problem across the whole network market.
“What they are trying to say is that we need some form of structure but they’re only looking at so many firms. It’s statistically relevant but it’s not necessarily representative of the whole industry.
“But we know there’s work to be done and we will be working with all firms to try and make sure that they can get ahead of this.”
TenetLime managing director Gemma Harle says: “What we have to bear in mind is the conversation the brokers have with a client when arranging mortgages are not limited to the initial one. The whole process is much bigger than that initial meeting the FCA has based this on.”
The regulator also warns many networks have not “adequately considered the potential risks of poor outcomes posed by their advice models”.
However, Intermediary Mortgage Lenders Association managing director Peter Williams argues many networks have already tackled the FCA’s concerns.
He says: “What we are seeing already across the distribution space is some shifting to better reflect the obligations to scrutinise and have some control.”
Personal Touch marketing director David Carrington says his firm redesigned fact-find processes for ARs to steer them away from a sales-oriented approach.
He says: “We find this report a useful steer in some ways, but it’s also an affirmation of what we have been doing for the last couple of years. We try to treat ourselves as risk managers rather than salespeople.”