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Outside edge

Perhaps Luke March should approach Estelle Morris to supervise the remaining period until the December 31 deadline for mortgage advisers to achieve their minimum qualification.

Then we could be confident that the deadline will pass without anyone knowing where they stand. We could revise the standards continually until the right political solution is found.

However, just like the A level debacle, I suspect the statistics overstate the number of advisers who actually advise on mortgages who will not qualify by the deadline.

Many in this group who have not yet passed their exams are general practitioners who do not advise on mortgages regularly and have recognised at a corporate level that it is more cost-effective to have only those who specialise in mortgages qualify.

Similarly, sole practitioners will achieve the same end by building local relationships with advisers who do specialise in mortgages.

The entire financial adviser market is quite rightly being led down the path of speciality by both regulation and the costs of PI cover. In reality, both differences in the required sales approach for mortgages versus other products, say, investments, and corporate risk management have meant that better intermediary businesses pursue this route. I have deregulated many mortgage IFAs in the past from the PIA simply because they may have been the best in the mortgage field but were woefully short in financial advice. Costs and business risk mean you only let them advise on classes they are expert in.

But CP146 allows us another way forward. Why be qualified when you can use a filter?

When my firm created netmortgage, we developed the most sophisticated attitudinal filters, later replicated by Charcol. But our conversion rate multiplied fourfold when we offered a callback service to answer every customer&#39s next question: “What do you think I should do?”

Filters are in practice used by every mortgage salesman in his product selection process, even if they are all in his head. They cannot be a substitute for advice – they are the basis on which it is given.

Thus, to allow unregulated individuals to apply filters will inevitably lead to the line being crossed into advice. Of greater concern is that lenders chose the filter route for their own distribution. Quite justifiable under CP146 but a disaster for the consumer.

To further compound the problem, it is now suggested that the amount of procuration fees received need not be disclosed. Given that there is still a requirement to disclose that a fee is payable, the only objectors to disclosure can be those who are concerned to reveal the true level of their income.

The ongoing dispute about the regulation of packagers only increases the fee confusion. The consumer ends up disadvantaged by being unable to fully compare the merits of both the level of service they are being provided with and the products recommended. The sectors at highest risk are the sub-prime market and lower end of the standard fee-charging market where non-disclosure of the fee amount can give rise to the most consumer exposure. How can a consumer negotiate a fee with an adviser when only one of them knows the total picture? How would many sub-prime borrowers react on learning that the total distribution income is 3 per cent? Commission is disclosed in the rest of the financial services market. What is so special about mortgages?

At last, we have uncovered the mystery of what the tiny proportion of advisers who intend to still sell mortgages but are not taking their exams are going to do. Take an enforced gap year and return unqualified selling mortgages using the filtration approach. No danger of them disclosing proc fees.

Mark Chilton is an independent mortgage expert

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