The final MMR paper called for a ban on non-advised mortgage sales. Do you think this is a good idea?
Hollingworth: I think most brokers feel this is a good thing, being proponents of advised sales. It puts lenders on a level playing field with advisers in terms of the training required, although this could end up being a problem for advisers to a degree.
But I think at least the customer will know that whatever channel they are going into, they will be getting some form of advice, even if it is only on the lender’s own products.
Montlake: Yes I do. The concept that a first-time buyer can get a 90 per cent mortgage on a property without taking any advice is crazy. Also, many who walk into a bank directly leave believing they have had advice even when they have not. We need a level playing field and clarity for the consumer.
Clark: This is not a good idea. Hardly anyone should be able to go non-advised but there is a small proportion of clients who should have that avenue.
The option not to receive advice should not apply to vulnerable people like equity-release clients. The FSA is saying it should be an option for wealthy clients but it has set the bar quite high.
An unnamed lender will be basing proc fees on the quality of business brokers submit. There have been concerns that this will just lead to lower proc fees for brokers. Do you think that is possible?
Hollingworth: There is pressure on proc fees from recent moves by Nationwide and Lloyds. Hopefully, any move to alter the way they are paid with a focus on quality will not just be some kind of effort to down-grade certain levels of business.
The quality issue is something that has come up time and time again.
It is logical that if as an adviser you are giving better quality of business, it will be more valuable to the lender. What you do need to know is what the measures will be for determining that quality.
Montlake: This may be a good idea in theory but there is always going to be a question mark over what each lender defines as quality. I would like to see an agreed minimum with uplifts for higher-quality business rather than the other way round.
Clark: I think I had this unnamed lender in my office yesterday. They said they already keep detailed metrics on their introducers but are looking to work more closely with the people that give them better quality business. Good quality advisers have nothing to fear but my concern is it will mean the best quality people will maintain their proc fees and the poorer will get a cut.
Lawyers are helping clients find ways to avoid coming under the new stamp duty law. Do you think the Government will be able to stamp out avoidance this time?
Hollingworth: I think it was firmly worded in the Budget speech that trying to avoid stamp duty is something the Government views pretty dimly. Anyone going into a scheme to try to avoid stamp duty may well be able to do it on a legal footing but you would have to expect to be under quite close scrutiny. And there is the ability for the Government to say retrospectively it is not an acceptable way to do it. A lot of people could end up owing tax.
Montlake: No. Government departments tend to work too slowly to keep up with the number of schemes that pop up to mitigate stamp duty. I believe the number of those bothering to pay high fees to avoid stamp duty is overegged and we have to be careful not to target the wrong people, such as charitable foundations. I hope the Government does work out a robust method of targeting those trying to buck the system unfairly but history seems to suggest otherwise.
Clark: I do not think the Government will be able to. We used to dabble and we preferred the term “mitigation” but it is avoidance really. The Government would have to alter stamp duty fundamentally and call it something else to end this.
As long as stamp duty is as complex as it is and there are clever solicitors, they will find ways round it. As fast as HMRC shuts down one loophole these companies set up another one.
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